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May 29, 2024

Adani’s Interest in Paytm: One97 Communications Dismisses Acquisition Rumors as Speculative

Reports have surfaced suggesting that Gautam Adani, the chairman of the Adani Group, is looking to acquire a stake in One97 Communications, the parent company of Paytm. However, One97 Communications has officially dismissed these reports as speculative.

In an official statement, One97 Communications clarified, “We hereby clarify that the abovementioned news item is speculative and the company is not engaged in any discussions in this regard. We have always made and will continue to make disclosures in compliance with our obligations under the Sebi (Listing Obligations and Disclosure Requirements) Regulations, 2015.”

The rumors, initially reported by the Times of India (TOI), claimed that Adani is in talks to acquire a stake in One97 Communications. According to TOI, Vijay Shekhar Sharma, the founder and CEO of Paytm, allegedly met with Adani at his office in Ahmedabad to discuss the potential deal. The report also mentioned that Adani is engaging with West Asian funds to attract additional investors for One97 Communications.

Vijay Shekhar Sharma currently holds approximately 19% of One97 Communications, with his direct stake in Paytm at 9% and an additional 10% through Resilient Asset Management, a foreign entity. Both Sharma and Resilient are categorized as public shareholders in One97’s stock exchange filings. Other significant stakeholders include Saif Partners, holding 15%, Antfin Netherlands, established by Jack Ma, with 10%, and the company’s directors collectively owning 9%.

Founded by Sharma in 2007, One97 Communications has grown significantly, conducting India’s second-largest IPO and currently maintaining a market capitalization exceeding Rs 21,000 crore. Despite its successes, the company is facing financial challenges, leading to strategic cost-cutting measures.

One97 Communications is reportedly planning to reduce its employee costs by cutting 15-20% of its workforce in the current financial year. In FY23, the company had an average of 32,798 employees, with 29,503 actively engaged. The average cost per employee was Rs 7,87,000. In FY24, the total expenditure increased by 34% year-on-year (Y-o-Y) to Rs 3,124 crore, with the average employee cost estimated to have risen to Rs 10,60,000. As part of its cost-reduction strategy, Paytm aims to save Rs 400-500 crore, potentially resulting in the layoff of 5,000-6,300 employees.

Amid these financial adjustments, One97 Communications is also refocusing its efforts on the Unified Payments Interface (UPI) Lite wallet, targeting users who prefer low-value transactions. This shift comes in the wake of regulatory actions by the Reserve Bank of India (RBI) against Paytm Payments Bank. The RBI has barred the payments bank from accepting new credits into its mobile wallets since March 15. Currently, customers can withdraw or transfer existing funds in their Paytm wallets to another wallet or bank account, but they cannot add new funds once the balance is exhausted.

The UPI Lite feature aims to streamline low-value transactions, providing an efficient alternative for users affected by the RBI’s restrictions on Paytm Payments Bank. By focusing on this feature, One97 Communications hopes to maintain its competitive edge in the fintech space while navigating regulatory challenges and financial pressures.

In conclusion, while speculation about Adani’s interest in acquiring a stake in One97 Communications has captured attention, the fintech firm has categorically denied any such discussions. As Paytm continues to adapt to market and regulatory conditions, its strategic initiatives, including workforce optimization and a renewed focus on UPI Lite, will be crucial in maintaining its growth trajectory and market position.

Jhumpa Lahiri

Jhumpa Lahiri

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