Mukesh Ambani Led Jio Financial to acquire Paytm: Share Price Surges 15% Amid Acquisition Buzz

Jio Financial Services (JFS) experienced a remarkable surge in share price, climbing over 15% to achieve a new record high on Monday. This surge was fueled by reports in the media indicating that JFS was a leading contender in the race to acquire Paytm’s wallet business.

On the Bombay Stock Exchange (BSE), Jio Finance shares saw a substantial jump of 16.25%, reaching a new pinnacle at ₹295.00 per share. In contrast, Paytm shares faced a different fate, remaining locked at a 10% lower circuit and hitting a record low level during this period.

According to a report from Hindu BusinessLine, One 97 Communications, the parent company of Paytm, is reportedly engaged in preliminary discussions with several investors regarding the potential sale of its wallets business. Citing sources, the report mentioned that Jio Financial Services and HDFC Bank are emerging as frontrunners in the race to acquire Paytm’s wallet business.

Jio Financial, Led by Mukesh Ambani Clarified

Later in the evening, Jio Financial clarified that it has not engaged in any negotiations regarding this matter.

Following a system audit report and subsequent compliance validation report from external auditors, Paytm shares plummeted as the Reserve Bank of India (RBI) restricted Paytm Payments Bank (PPBL) from conducting certain operations.

Jio Financial Services is a demerged arm of billionaire Mukesh Ambani-led Reliance Industries. The non-banking finance company (NBFC) operates its financial services business through its consumer-facing subsidiaries, namely Jio Finance Limited (JFL), Jio Insurance Broking Limited (JIBL), and Jio Payment Solutions Limited (JPSL), and a joint venture, namely Jio Payments Bank Limited (JPBL).

The company had partnered with the world’s largest asset manager BlackRock to set up an asset management company with a combined investment of $300 million. Jio Financial Services had said that the joint venture, Jio BlackRock, would deliver “tech-enabled access to affordable, innovative investment solutions for millions of investors in India.”

In the quarter ending December, JFS posted a consolidated net profit of ₹293.82 crore, marking a 56% decline from ₹668.18 crore recorded in the previous quarter (Q2FY24). Additionally, the company’s consolidated revenue from operations in Q3FY24 dropped by 32% sequentially, amounting to ₹413.61 crore compared to ₹608.04 crore.

JFS, which separated from Reliance Industries in 2023, entered the stock exchanges on August 21 of the same year.

Could Paytm’s wallet business be up for grabs?

According to The Hindu Business Line, HDFC Bank and Jio Financial are reportedly leading contenders in the race to acquire Paytm’s wallet business. The report suggests that discussions between Paytm CEO Vijay Shekhar Sharma’s team and Jio Financial have been ongoing since last November, while talks with HDFC Bank commenced shortly before the RBI’s ban on Paytm Payments Bank.

What’s driving Paytm’s crisis?

Amid an existential threat following the Reserve Bank of India’s (RBI) prohibition on Paytm Payments Bank from accepting deposits or credits to customer accounts, Jio is reportedly considering acquiring Paytm Payments Bank as part of a broader bailout strategy.

Previously reported by PTI, there are suspicions of the entity being exploited for money laundering purposes. Paytm has refuted all accusations, asserting that neither the company nor its founder and CEO are under investigation by the Enforcement Directorate for money laundering charges. However, Paytm’s shares plummeted by 42% in just three days following the RBI’s directive.

What is Jio Financial aiming for?

Jio Financial’s agenda includes the relaunch of Jio Payments Bank, now equipped with digital savings accounts and bill payment capabilities. Alongside, leveraging a network of 2,400 business correspondents, it has introduced debit cards. Furthermore, Jio has initiated a pilot launch of Jio Voice box, enabled UPI on Jio phones, and is rolling out QR code implementation across its ecosystem.

During a virtual town hall with employees of Paytm Payment Bank Ltd (PPBL), Paytm CEO Vijay Shekhar Sharma offered reassurance, stating that there’s no cause for concern. He emphasized that employees are valued members of the Paytm family and assured them of support from various banks.

While uncertainties remain about the situation, he pledged to resolve matters swiftly, including reaching out to the RBI for guidance on potential solutions.

The story has been revised to include the response from Jio Financial Services.

Source: Google, Mint , Hindustan Times

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