One97 Communications Ltd, parent company of online payments app Paytm is set to extend Rs 743 crore funding to two companies owned by founder Vijay Shekhar Sharma. This development comes ahead of the $3 billion IPO planned later this year. The proposal will be put to vote at the company’s annual meeting on June 30.
According to the proposal, as sent in a note to shareholders after Paytm board meeting on May 28, the company will buy Rs 491.93 crore of optionally convertible debentures to be sold by VSS Holdings Pvt Ltd, where Vijay Shekhar Sharma (VSS) is a director. The debentures will mature in 10 years and bear an annual interest rate of 15 per cent, as mentioned in a report in Livemint.
The note, as per the daily, stated that the funding will be one in one or more tranches. The payments company will own 96 per cent in VSS HoldCo on converting the debentures into shares that can be done at any point.
VSS HoldCo will utilise the funds for its primary business activities in the country. VSS HoldCo is involved in activities related to financial intermediation.
The other loan, as proposed, is an amount of Rs 250.79 crore to VSS Investco Pvt Ltd through inter-corporate deposits or ICDs. This is likely to be done in one or more tranches.
In the note to shareholders, VSS Investco will have to repay the amount within 12 months or before Paytm’s IPO, stated the company. Sharma will raise external funding or sell his shares in the company to repay the loan. This amount will also be used for principal business activities.
VSS HoldCo and VSS Investco were both incorporated in January 2020.
Paytm is one of the leading players in the payment space in the country. Due to the increase in demand for digital transactions amid the pandemic, Paytm’s valuation rose significantly to more than $25 billion in the last 18 months. The company is aiming to launch its IPO in November this year. The IPO might witness partial exit of existing investors including SoftBank.