China’s Ant considers selling Paytm stake amid territorial tensions with India

As reported by Reuters, Chinese fintech giant Ant Group is considering sale of its 30% stake of Indian digital payment processor Paytm, in backdrop of the tensions between the two Asian neighbours and a rising competitive landscape.

Financial details of the possible transaction have not been finalized yet and Ant has not commenced a formal sale process yet, four people aware with the matter told Reuters.

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Both Ant and Paytm have denied the rumours. A Paytm spokesman said, “There has been no discussion with any of our major shareholders ever, nor any plans, about selling their stake.”

Ant’s possible exit from Paytm would mark another reversal for the Chinese company following the dramatic suspension of its $37 billion stock listing last month, which would have been listed in history as the world’s largest. It would also be a blow to its ultimate goal of becoming a global payments leader. Sources told Reuters in October that Ant was cutting its financial support to many of the overseas affiliated e-wallet firms.

The final push for Ant to consider the divestment of its stake in Paytm is traced back to the worsening diplomatic relations between India and China in the past few months, said the people, who declined to be named as the deliberations are confidential.

Relations between the countries are at their worst, with troops locked in a border face-off in the western Himalayas for months after a clash in June in which 20 Indian soldiers were killed, which further incited action from India in the form of tightened rules for investments from China and banning Chinese mobile apps. These included those from tech giants Tencent, Alibaba and ByteDance. It banned 43 more apps late last month.

Ant first invested in Paytm in 2015 and possesses its 30% stake in the firm via its parent company, One97 Communications, according to Ant’s initial public offering prospectus, which described the Indian firm as a major associate. In addition to the tighter investment rules for Chinese companies in India, tougher competition is likely another factor behind Ant’s calculations regarding Paytm, which is fast losing its dominance, two of the people said. Online transactions, lending and e-wallet services have only witnessed an upward graph in India, led by a government push to make the country’s cash-loving merchants and consumers adopt digital payments.

That has led to the entry and expansion of Facebook-owned WhatsApp, Alphabet Inc’s Google Pay, and Walmart’s PhonePe. Some domestic players are also eying expansion of operations.