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SoftBank institutes IPO clause for investing in Indian payment unicorn Paytm

The Japanese investment firm has asked its portfolio companies, including the ones in India, to aim at profits.

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After getting both hands burnt with its investments in co-working unicorn WeWork and ride-hailing giant Uber, Japanese internet giant SoftBank, the world’s largest tech investor, is not leaving any stone unturned to ensure it doesn’t repeat the same mistake in its future transactions.

While Masayoshi Son, CEO at SoftBank has already signed the documents to lead USD 1 billion funding round in the loss-making Indian fintech company Paytm’s parent One97 Communications, he wants the company to go for an IPO in the five years’ time from investment, failing which he will be free to sell the shares to a rival company.

“SoftBank has finally signed the documents to invest in the new round of funding, but with conditions,” a person close to the matter told local media Economic Times.

As of now, SoftBank holds 19% stake in the company.

“After a few rounds of negotiations, these terms have been agreed upon and the deal is nearing closure. A listing condition is common among financial investors. The Japanese company feels that Paytm has reached a stage where such a term can be included,” another source told ET.

According to the report, US-based asset manager T Rowe Price would invest around USD 150 to 200 million with existing backers SoftBank and Ant Financial jointly filling in with the rest of the amount in the billion-dollar funding round.

On various occasions, Vijay Shekhar Sharma, founder of One97 Communications, has reiterated that the company is working on various strategies to cut mounting losses. One97 posted a net loss of INR 3,959.6 crore (USD 550 million) in FY19, an increase of 165%, compared to INR 1,490 crore (USD 206 million) a year earlier.

Lately, it’s been facing increasing competition in the payment space from Google Pay and PhonePe that rose to number one and two position, respectively, in terms of total number of UPI-based payments.

Paytm has also stopped transferring money under its cashback strategy, and instead, it’s giving coupons that can be used to avail minimal discount while transacting on the bouquet of other services on its platform such as booking travel tickets, paying utility bills, among others.

Son, during the investors call said SoftBank Vision Fund 1 has stopped making fresh investments from as it has already committed more than 80% of the fund.

The ET report quoted Deep Nishar, senior managing partner at SoftBank Vision Fund, as saying that the Japanese investment firm has asked its portfolio companies, including the ones in India, to aim at profits, and stop “chasing growth for the sake of growth.”

SoftBank is already trimming at least seven non-core business areas of WeWork, including Conductor, a digital marketing platform, Wave Garden which creates wave pools, Teem, a conference room booking technology, among others.