UBS Group AG, an investment bank & financial service company, has reportedly initiated talks to make an investment of $400 million in an Indian startup, Paytm.
People with knowledge of the matter have reported that the upcoming investment is expected to help the company expand in the accelerating digital payments market in India. Currently, the fund run by the asset management arm of UBS is having discussions with the Indian company, along with some of the UBS clients, to purchase a stake.
Additional information about the deal has not been disclosed. Representatives for Paytm and UBS also declined to respond to requests for comments.
Sources further added that the bank has been negotiating the stock purchase deal with a group of employees working in the Indian e-Commerce payment system. It is targeting to finalize the investment by the end of January 2021. Despite this anticipation, the discussion is likely to be delayed or remain unsettled.
Paytm, which was valued at $16 billion in a funding round in 2019, is backed by the Chinese technology company, Ant Group Co. The company is reportedly not raising any new capital as a part of the agreement, sources added. It has been facing an immense competition from rivals such as Google Pay, Facebook’s WhatsApp payments service, Walmart’s PhonePe, and other smaller payment startups.
Due to the growth of electronic payment systems over the physical check-based system in the Indian market, global investors are keen to capitalize on the trend. In 2016, the government pulled huge swatches of its cash out of circulation in a bid to tackle corruption. The sudden ban implied that 86% of all the cash in circulation in the country was no longer a legal tender; due to which, businesses could refuse to accept these bills as a payment method.