Late on Monday May 12th, a term sheet leaked from Mumbai’s dealing desks: Ant Group will off-load another 4 percent stake in Paytm for US$242 million, bringing its holding below double digits for the first time since 2015. Goldman Sachs and Citi wrapped up the block deal before breakfast, clearing 25.5 million shares at a 6 percent discount to Friday’s close; the stock promptly fell 5 percent when markets opened the next morning.
For Paytm, already reeling from a Reserve Bank of India order that forced its payments bank to wind down, losing a once-strategic backer looks brutal. For Ant Group, it is the endgame of a two-year process that began when India’s border skirmish with China in 2020 triggered Press Note 3, a rule that makes any Chinese investment in an Indian company subject to direct government approval. Ever since, Beijing-linked shareholders have treated the exits door like a low-cost carrier: queue early, carry light.
A slow-motion divorce
Ant Group’s retreat has been methodical. In August 2023 it sold 10.3 percent of Paytm to founder Vijay Shekhar Sharma for US$628 million, trimming its stake to 13.5 percent. Last week’s sale slices another four points, leaving roughly 9 percent on the books—conveniently under the 10 percent threshold that triggers extra disclosure in Delhi. Berkshire Hathaway bailed out in 2023; SoftBank whittled its holding to under 3 percent earlier this year. What began as a cap-table crowded with global trophy investors now resembles a domestic affair backed by Indian mutual funds.
The timing is no accident. This quarter Paytm faces a rebuild after the RBI told its payments bank to shut shop for “persistent non-compliance.” That edict killed the one licence that made Paytm more than just another wallet and cemented the market’s view that the firm is living on regulatory borrowed time. Selling today locks in cash while a buyer can still spin a turnaround story.
Has détente really thawed?
Pro-business voices in New Delhi insist relations with China are normalising. The Finance Ministry’s July 2024 economic report even floated the idea of encouraging selected Chinese manufacturers to build export platforms in India. That sounds like détente until you remember that every single yuan of FDI from a “land-border country” still needs sign-off.
Fintech sits in an even tighter box. Mobile wallets move data as well as money, and Delhi’s policymakers are not eager to let Chinese code ride inside India’s Unified Payments Interface (UPI). Ant learned this the hard way: after the 2020 border clash it spent months waiting for a green light to inject new funds into its Paytm Payments Bank joint venture. The approval never came; the bank stumbled; the share price collapsed. Exit became the only rational strategy.
What Ant actually wanted
Back in 2015, the Ant Financial-Paytm romance looked like a mutual dream. Ant gained a front-row seat in what would become the world’s fastest-growing payments market; Paytm gained Alipay’s QR know-how just in time to surf prime minister Modi’s demonetisation wave. For a while it worked: Paytm’s daily active users soared, and Ant talked up a “Belt-and-Road of fintech” during Jack Ma’s Davos appearances.
But the strategic fit eroded quickly. UPI, launched in 2016, gave every bank in India a cheap, instant rail to the same QR party. Google Pay and Walmart-backed PhonePe jumped in, subsidising cashback far faster than Paytm could raise fresh capital. Ant’s Alipay playbook—win market share with discounts, layer on loans—never got room to breathe. By the time Paytm listed in 2021 at a US$20 billion valuation, the house money was already leaving the casino.
Why the exit matters beyond Paytm
In pure dollars, Ant’s latest block trade will barely dent China’s outward investment ledger. Symbolically it speaks volumes.
- Delhi’s gatekeeping works. A G20 member just forced the world’s biggest fintech to abandon a decade-old stake in its flagship payments unicorn. Beijing can’t point to a single reciprocal example.
- Strategic capital is going regional. With Chinese money stuck outside, Southeast Asian, Middle-Eastern and now Latin-American investors are lining up. The funds circling Paytm’s latest block are reportedly a mix of domestic institutions and Gulf sovereign wealth.
- Fintech nationalism is sticky. India wants foreign capital but not foreign control, especially in data-intensive sectors. Expect future deals to mimic Walmart’s Flipkart structure: domestic CEO, foreign cheque book, board seats that don’t equal operational sway.
A glimpse of tomorrow’s cap-table
If Ant is gone and SoftBank is almost gone, who fills the hole? Domestic private-equity firms have dry powder, but they demand path-to-profit timelines shorter than Paytm has ever delivered. Strategic investors from the Gulf bring patience and access to cross-border remittance corridors—valuable in theory, awkward in practice while Paytm restructures its banking relationships.
And then there is the government. New Delhi’s ONDC (Open Network for Digital Commerce) wants an interoperable layer that dilutes the power of any single fintech super-app. A slimmer, regulation-friendly Paytm might fit neatly into that playbook, provided it can survive twelve months of licence purgatory without the deep pockets of Hangzhou’s finest.
Final take
Ant’s sale is less a détente than a demarcation line: Chinese capital out, controlled foreign capital cautiously in. Paytm, for its part, must persuade users, regulators and new investors that a home-grown wallet can thrive without the technical muscle, and the political baggage, of its original Chinese patron.
The bigger question is what Ant’s retreat signals for every other Sino-Indian fintech cross-holding still on the books. Press Note 3 isn’t going away; the RBI’s patience for governance missteps is shrinking; Indian public opinion remains hawkish after every fresh border flare-up. The great China unwind may be only halfway done.
We’ll be watching the next shareholding disclosures—and the fine print of any Gulf-backed rescue financing—to see whether Paytm can reinvent itself faster than its former partner can empty the rest of its stake.