Paytm shares: Vijay Shekhar Sharma shows skin in the game, removes overhang, says BofA

BofA Securities said One 97 Communications (Paytm) founder entering into an agreement to purchase 10.3 per cent stake in Paytm from Ant financials removes an overhang on the stock. There was earlier a risk that China-based Antfin may look to reduce its stake, leading to more supply. With the fresh development, no shares of Sharma will be pledged. There will also be no nominee of Antfin on the Board of Paytm.

"We consider this announcement to be positive. Furthermore, Sharma buying the stake at Friday's close indicates his confidence in the story with a 'skin in the game' approach show. This event also reduces risk that some other strategic investor coming who would have a major stake similar to that of Sharma. We believe a Chinese shareholder (Antfin) ceasing to be the largest shareholder would also directionally be positive for the company fundamentals," BofA Securities said.

The foreign brokerage noted that the Reserve Bank of India (RBI) had in November declined Paytm Payments Services Limited's (PPSL) application to operate as a payment aggregator and it gave it 120 days to reapply for the license.

"Until it gets an approval, the company, which is a wholly owned subsidiary of Paytm, has been asked to not onboard new online merchants. As per media, this was to give PPSL time to comply with foreign direct investment (FDI) guidelines. We now don't expect such concerns going ahead. Maintain Buy on Paytm on favourable risk-reward," the brokerage, which has a target of Rs 1,020, said.

Sharma's direct shareholding in Paytm will increase to 19.42 per cent, whereas Antfin's shareholding will reduce to 13.5 per cent. The acquisition will be made by Sharma's 100 per cent owned overseas entity, Resilient Asset Management BV.

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