In order to provide a financial support to the Payment Bank that the mobile payments and e-commerce giant PayTm is currently working on, founder Vijay Shekhar Sharma might dilute up to 1% of his own stake in holding company One97 Communications Ltd, reports ET.
Following a request by multiple entities, Reserve Bank of India granted permission to 11 companies to set up their Payment Bank within 18 months of receiving the permission.
The 11 companies namely, including Reliance Industries, Airtel M Commerce Services, Vodafone m-pesa Ltd., Tech Mahindra, Idea Cellular’s promoter Aditya Birla Nuvo, Fino PayTech, Department of Posts, National Securities Depository Ltd., Sun Pharmaceuticals founder and MD Dilip Shantilal Shanghvi and Cholamandalam Distribution Services Ltd, have started working on the project post the permission.
As per Paytm, the Payment Bank will need a sum as big as Rs. 150 Crore to become a fully fledged service. As per the central bank’s mandate, Sharma has to own 51% of the payment bank and the remainder can be held by corporate entities.
To provide financial support, Sharma might dilute 1 percent of his own stake to the parent company One97 Communications Ltd. Sharma said the plan is to infuse between $25 million and $50 million of capital into the bank until operations become profitable. As of now, Sharma owns 21% stake in the parent company and is valued at $3.4 billion.
Vijay Shekhar Sharma, Founder at Paytm said –
We will go to the market post-Diwali and tap current investors, banks as well as financial institutions for funding. The stake dilution will be less than 1%. We are figuring out whether we require more funds.
Consultancy firms EY and McKinsey have been hired to draw the blueprints of the financial and management state of the company. Also, they plan to announce the CEO and the rest of the team for the Payment Bank soon.