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Home Business

Paytm to spin off its payments division into standalone entity

by Balraj
September 2, 2021
in Business, India News, Startups, Tech
Reading Time: 2 mins read
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Paytm App opened on Poco F1

Source: PYMNTS.com

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Mobile payments giant Paytm is planning to spin off its payment aggregator business into a new subsidiary called Paytm Payments Services Limited. As the deadline for complying with the Reserve Bank of India’s payment aggregator guidelines looms, the company informed its stakeholders in a notice dated August 31.

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Paytm App opened on Poco F1
Source: PYMNTS.com

The fintech unicorn will request stakeholder consent for the same at an extraordinary general meeting hosted on September 23. Paytm stated in a circular to shareholders that the transfer of its payments business indicative book value which includes gateway business will be executed on a slump sale basis for a lump sum amount between 275-350 crore, which will be offered to its parent company One97 Communications Ltd in five equal annual installments.

The decision is in accordance with Reserve Bank of India norms, which mandate that payment aggregators be run as a standalone entity after receiving a license from the central bank. In March 2020, the Reserve Bank of India (RBI) announced guidelines to monitor payment aggregators (PAs) and payment gateways (PGs). All PAs must be recognized by the RBI, according to the guidelines. Non-bank companies that provide PA services were required to apply for approval by June 30, 2021, which was then extended to September 30.

PAs in simple words are businesses that integrate with e-commerce platforms and connect them to banks. They handle payments on behalf of these businesses and deposit the funds into their accounts.

Zomato, the online food aggregator, had also registered a wholly-owned division under the name of Zomato Payments Private Limited earlier this month to handle payment aggregator and payment gateway services. PhonePe, another Bengaluru-based digital payments company, has also obtained RBI approval in principle to operate as an account aggregator. Aside from that, around 30 companies, including Amazon and CRED, have sought a payment aggregator license.

Paytm, which prepares to raise Rs 16,600 crore in an IPO, provides payment, commerce, cloud, and financial services to 333 million customers including over 21 million merchants in India. Vijay Shekhar Sharma’s digital payment platform’s valuation increased by 16 percent ahead of IPO according to an evaluation report issued by US-based investment management firm T. Rowe Price. Paytm shares are valued at $295 each, up from the original $254 price. Paytm’s initial public offering (IPO) is projected to be one of the largest in India, and the current evaluation by T Rowe Price reflects the confidence it has gained significant momentum before listing.

Tags: Account AggregatorDigital Paymentdigital payment startupDigital Payments BusinessFintech Startupfintech startups IndiaOne97 CommunicationsPayment AggregatorsPayment GatewayspaytmPaytm Payments BankVijay Shekhar Sharma
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Balraj writes about Startup, Business, Technology related news on Techstory... For Business Enquires related to TechStory; Get in touch on: [email protected]...

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