Paytm’s wallet business could perhaps be the first victim of the Reserve Bank of India’s strict ban on the Paytm Payments Bank imposed on January 31, 2024. Housed under Paytm Payments Bank, highly placed sources say the company is in exploratory talks with a few interested investors to sell the wallets business. HDFC Bank and Jio Financial Services are said to be among the forerunners to acquire the same.

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Emails sent to Paytm Payments Bank, HDFC Bank and Jio Financial Services remained unanswered till press time.

Talks on

According to seven senior fintech and banking sector senior executives with knowledge of the matter, Paytm has been in deal talks with Jio Financial Services since November last year. “With KYC related issues compounding for Paytm, they’ve not been as aggressive with the business as they were prior to 2022 in the wallets business and if valuations on the table were decent, the talks would with Jio would have fructified much earlier,” said one of the bankers.

But now with the business facing the threat of coming to a screeching halt, the intent of selling the business is more to ensure continuity for Paytm’s existing wallet users. “You could call it a distress sale. In such a situation, valuation is the last thing that Paytm can hold on to,” said a fintech expert who didn’t want to be named.

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However, just ahead of the strict ban on Paytm Payments Bank being imposed, Paytm is said to have reached out to HDFC Bank for a deal. “HDFC Bank is one of the important banking partners for Paytm and the deal would help the bank to beef up its proprietary wallet business, while simultaneously solving many issues for Paytm,” said a senior banker who didn’t want to be named.

Reintroduced last year, Payzapp HDFC Bank’s digital wallet has about 14 million users. “There is a reasonable overlap between HDFC Bank customers and Paytm wallet users and many of them continue to use Paytm wallet over Payzapp. For HDFC Bank, a deal with Paytm could address this issue,” said another person familiar with matter.

Bailout plan in sight?

As for Jio, it has barely made a dent in the payments bank space and acquiring Paytm’s wallet could give it the much-needed head start. In fact, sources add that as part of a larger bailout plan, Jio could also make an offer to acquire Paytm Payments Bank. “With the risk of the payments bank license getting revoked, this could be a win-win for Jio Payments Bank, Paytm and the larger payments ecosystem as well,” said the banker quoted above.

Solid business

RBI data for December indicated that Paytm Wallet users carried out approximately 24 million transactions totaling to ₹8,000 crore for purchase of goods and services, while about 20 million transactions totaling to ₹5,800 crore were carried out to transfer money. With 330 million wallet accounts, Paytm is the largest player in the wallets segment. Vijay Shekar Sharma holds over 51 per cent stake in the payments bank and the rest is held by One97 Communications.

Wallet up for grabs

– Housed under Paytm Payments Bank, HDFC Bank and Jio Financial Services said to be frontrunners to acquire Paytm Wallet

– Deal advantageous to boost wallet volumes for HDFC Bank and Jio Financial

– HDFC Bank’s Payzapp has about 14 million users; Jio’s wallet user base could be insignificant

– Sources say as part of a larger bailout plan, Jio may offer to acquire Paytm Payments Bank

– With 330 million wallet accounts, Paytm is the market leader in wallets segment

– Vijay Shekar Sharma holds over 51 per cent stake; rest held by One97 Communications