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SoftBank Sheds Paytm Stake: Strategic Divestment Amidst Startup Slowdown and Portfolio Performance Evaluation

Japanese investment giant SoftBank has divested its stake worth Rs 3,800 crore in Paytm during the ongoing fiscal year, including a recent Rs 960 crore sell-off. The transactions, occurring in three tranches in May, July, and December 2023, with the fourth concluding recently, led to a substantial reduction in SoftBank's stake in Paytm by 61.78%. At the beginning of FY24, SoftBank held a 13.24% stake in Paytm, now reduced to just over 5%, according to stock exchange filings. This move aligns with SoftBank's trend of selling stakes in companies that have undergone IPOs in the past few years, including complete exits from PolicyBazaar and Zomato.

The divestment from Paytm comes amidst a slowdown in investment activities in late and growth-stage startups. SoftBank, a major investor in companies like Oyo and Lenskart, refrained from making new investments in 2023 after significant capital injections in 2021 and 2022. The investor is reportedly considering new investments in a fresh set of companies in the second half of 2024. The decision to resume investments will be influenced by the performance of SoftBank's portfolio companies, including Ola Electric, FirstCry, and Unicommerce, which are expected to go public soon.

As of August 2023, SoftBank has earned $5.5 billion through exits from its Indian portfolio since its launch in 2018, and further partial or full exits are anticipated in the future. Meanwhile, retail investors have shown increased interest in Paytm, with their holdings rising significantly in the current fiscal year. Paytm's positive quarter-on-quarter financial performance, including a 7.98% increase in revenue from operations to Rs 2,138 crore and a 21.66% reduction in losses to Rs 253.6 crore in Q3 FY24, has contributed to growing confidence among retail investors in the payment firm's future prospects.


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