India’s largest IPO process is gaining steam, Paytm has involved a unprecedented general meeting (EGM) to urge shareholder approval on various steps and fresh fund raise of Rs 12000 crore. Paytm is trying to find a PMC or Professionally Managed Company status by declassifying Vijay Shekhar Sharma’s promoter status and highlighted the plan for a pre-IPO placement option.
This paves the way for a few critical SEBI approvals required for Paytm to succeed in its goal of a listed entity on stock exchanges.
Vijay Shekhar Sharma doesn’t own the specified 20 per cent stake as per SEBI norms to be a promoter and therefore the company has chosen to seem for his declassification from the promoter tag. SEBI approval are going to be required for the corporate to urge the PMC status.
There are a couple of aspects critical for Paytm to satisfy the PMC eligibility criteria. Under this norm no single entity can own 25 per cent or above within the company.
Paytm’s single largest shareholder Ant Group with on the brink of 30 percent stake within the company is listed on Hong Kong stock market with Alibaba holding 33 per cent in Ant Group. Alibaba & Ant Group together hold 37 per cent stake in Paytm.
A lot will depend upon how the market regulator views this investment in Paytm at the time of approving the DRHP or the Draft Red Herring Prospectus, single entity or Alibaba & Ant Group as separate entities.
A source said, “Alibaba and Ant Group don’t have a voting pact which are going to be the most important pitch by Paytm to position them as separate entities.”
If this passes the muster of SEBI then Ant Group would require to sell down about 5 per cent stake in pre-IPO and IPO process and suits the below 25 per cent stake norm. Paytm’s EGM agenda has incorporated the choice of a pre-IPO placement.
Question arises if the market regulator views the 2 as a combined entity. From 37 per cent, bringing the holding right down to below 25 per cent are going to be a frightening task. it’ll also depend upon the demand for the shares.
This is not the route chosen by Paytm and that they have decided to travel with a PMC status, subject to the approval of the shareholders and therefore the market regulator SEBI.