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Paytm Block Deal: A major development has come to light amid the fall in the shares of Paytm’s parent company One97 Communications on Monday. Netherlands firm ‘Resilient Asset Management’, wholly owned by the company’s founder and CEO Vijay Shekhar Sharma, is preparing to sell up to 4.98 percent of its stake in Paytm. This stake sale will be completed through a block deal, which can give big investors an opportunity to buy shares at a price slightly lower than the current market price.

Mathematics of block deal and floor price of shares. Paytm Block Deal

Paytm shares closed at ₹1,580.20, down 1.4 per cent, in Monday’s trading session. Based on this closing price, the market value of the 4.98 percent stake to be sold comes to around ₹ 5,040 crore. However, according to reports, the floor price for this block deal can be fixed at ₹1,535.10 per share. This price is about 2.9 percent less (at a discount) than Monday’s closing price. If the entire 4.98 per cent stake is sold at this agreed floor price, the total size of the deal is estimated to be around ₹4,895 crore.

How did Resilient take the stake??

Resilient Asset Management had acquired about 10.20 percent stake in Paytm from ‘Antfin Netherlands Holding’ in the year 2023. The deal was completed through an Alternative Convertible Debenture (OCD) structure rather than outright share purchase. Under this arrangement, Resilient got ownership and voting rights on the shares, while the economic interest in the shares remained with Antfin. Under this arrangement, now Antfin will also get the financial benefit of the money received from the proposed block deal.

What is the impact on Vijay Shekhar Sharma’s direct stake??

According to the company, this proposed block deal will not have any impact on Vijay Shekhar Sharma’s own direct stake in Paytm. At the end of the June quarter, Vijay Shekhar Sharma directly held 9.03 per cent stake in the company. This means that the stake being sold through Resilient will not be counted as reduction in Sharma’s personal holding.

Stock market and its meaning for investors

Market experts believe that due to such a large amount of new shares coming into the market, there may be short-term pressure on Paytm’s stock. However, if the block deal goes smoothly and is embraced by large institutional investors, the long-term impact is likely to be limited given the company’s strong business numbers.