Paytm IPO: One97 Communications Approves Rs 492-Crore Loan To Promoter Vijay Shekhar Sharma

Vijay Shekhar Sharma, founder and chairman of One97 Communications Ltd., operator of PayTM, gestures as he speaks to colleagues during a meeting at the company's office in Noida, Uttar Pradesh, India.

Paytm IPO: One97 Communications Approves Rs 492-Crore Loan To Promoter Vijay Shekhar Sharma

Paytm founder Vijay Shekhar Sharma has received approvals to borrow funds from One97 Communications Pvt. to purchase an insurance company. The deal is disclosed as part of related-party transactions in the draft red herring prospectus filed ahead of Paytm’s initial public offering.

At an annual general meeting on June 30, the shareholders of One97 Communications Pvt. approved a proposal to extend a loan worth Rs 492 crore to VSS Holdings Pvt., a company fully owned by Sharma. One97 Communications approved the loan through the issuance of optionally convertible debentures. The debentures will carry a 10-year tenure and an interest rate of 15% per annum.

The funds availed by VSS Holdings will be infused into Paytm Insuretech Pvt., which will, in turn, use the money to buy 100% stake in Raheja QBE General Insurance Co. Paytm Insuretech, formerly known as QOQRL Pvt., is an associate company of One97 Communications where Sharma holds majority equity.

Paytm had signed an agreement to buy Raheja QBE General Insurance in July 2020, for which approvals from the Insurance Regulatory & Development Authority of India are pending.

"Currently, there is no certainty that this transaction will be consummated, or whether VSS Holdco will raise these funds from the Company, or instead from a third party, for the purposes of infusion in PIT," the prospectus said. One97 Communications reserves the right to convert the debentures into equity shares of VSS Holdings, it said.

One97 Communications aims to raise Rs 8,300 crore through a fresh issue of shares. An offer for sale of a similar amount, where existing shareholders will dilute their holdings, is also part of the public offering.

Sharma, who holds 9.61% stake in One97 Communications, will be selling a portion of his shareholding during the IPO, the prospectus said. However, the amount of shares to be sold by him has not yet been detailed.

Sharma also holds 51% in Paytm Payments Bank Ltd. One97 Communications holds a call option on Sharma's stake in the payments bank, subject to his shareholding not falling below 40% during the mandatory lock-in period, the prospectus details.

Also read: Paytm Seeks SEBI Nod For Up To Rs 16,600-Crore IPO

Also read: What Paytm's IPO Prospectus Tells Us About Its Business

Also read: Vijay Shekhar Sharma's Paytm: The Journey To Its IPO

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