Two weeks after Alibaba’s affiliate Ant Group said it has significant influence over its Indian portfolio One97 Communications, fueling the controversy of Paytm being a Chinese company, the latter has denied the claim by its Chinese backer.
Ant Group owns an almost 30% stake in USD 16-billion One97 Communications, India’s most valued startup, which runs the country’s largest payment services platform, Paytm. During its IPO last month, the Chinese behemoth said it has significant influence and joint control over the Noida-headquartered firm.
“All shareholder rights are the same for our investors, with Ant Financial having no influence on our daily operations,” Madhur Deora, One97’s president and chief financial officer, told local media Mint in an interview. “Our business decisions are taken by our senior management teams to drive financial inclusion in the country.”
“We do not have executives from our shareholders or any other company working on our products, nor does anyone have access to customer information, which is regulated, audited, and stored safely in India,” he added.
Paytm emphasized that it is not a Chinese company, just because one of its major investors is an Hangzhou-headquartered financial institution. Apart from Ant Group, it counts global heavyweight VCs such as SoftBank, SAIF Partners, Berkshire Hathaway, T Rowe Price, and Discovery Capital.
Read this: Ant Group’s IPO documents indicate its joint control in Indian payments firm Paytm
“It is illogical to call Paytm a Chinese company when all our products and licences are governed by Indian regulators,” Paytm’s founder Vijay Shekhar Sharma told Mint. “Unlike other payment service providers, our payment operation is completely housed under Paytm Payments Bank (PPBL).”
On the topic of significant influence, he said, by accounting standards, any company with more than 20% stake in an establishment is considered to have a tag of ‘significant influence’.” While Ant Group holds the majority stake with a 29.7% share, Japanese conglomerate SoftBank has a 19.6% shareholding, followed by SAIF Partners with 18. 56% stake. Sharma, who founded Paytm in 2010, holds 14.6% shares.
Amid the continued backlash and anti-China sentiments due to the border clash, Paytm is one among the many Chinese VCs-backed companies, that has been trying to keep a one hand distance from their China connection.
“Paytm, as a brand, is controlled and governed by all Indian laws and follows all regulations set by government agencies. Paytm has been, and will always remain Indian,” said Deora.
According to Deora, Paytm’s ambition is to drive financial services that are regulated by Indian regulators, the Reserve Bank of India (RBI), the Insurance Regulatory and Development Authority of India (Irdai), and the Securities and Exchange Board of India (Sebi).
“Our regulators, such as RBI, Irdai, and Sebi, are highly sophisticated. In certain sectors, there is a requirement for the majority of Indian shareholding which allows critical sectors to be governed in prescribed ways,” said Deora.
To comply with the local norms, Paytm has spun off its financial services subsidiaries and restructured ownership patterns, the Mint report said. For instance, Paytm’s Sharma owns a 51% stake in Paytm Payments Bank while the rest is owned by One97 Communications, it added.
Sharma also said the last USD 1 billion funding from SoftBank, Ant Group, and T. Rowe Price last November is most likely the company’s last equity fund-raise before it starts the process of going public.