Paytm founder Sharma to invest in insurance business from IPO proceeds

Paytm Owner One97 Communications Ltd (OCL), which is preparing for an IPO from November 8, had earlier planned to lend ₹743 crores to investment entities – VSS Investco and VSS Holdings – owned by founder Vijay Shekhar Sharma. As a part of the transaction, Paytm was expected to buy ₹The Optional Convertible Debentures worth Rs 491.93 crore will be sold by VSS Holdings Pvt. Ltd., of which Sharma is a Director.

The money was to be used to acquire Raheja QBE and invest in Paytm’s general insurance business, Paytm Insurtech Pvt. Ltd (PIT), Chairman of One97 Communications Ltd and Group Chief Financial Officer Madhur Deora.

That plan has now been abandoned. Instead, Sharma can use the money earned from the OFS to fund the PIT. Investment in PIT will be done through Sharma’s investment vehicles, Deora explained.

“We are not committing a thought loan from One97 Communications to VSS Holdings. In our RHP (red herring prospectus) we have disclosed that we are effectively avoiding shareholder approval on the loan. The root cause of the loan is Vijay K. So, Vijay is actually arranging separate funding for that (acquisition),” Deora said. Mint In conversation on Thursday.

“We had some time-frame to meet (Raheja QBE’s) on the procurement plans. But now that we have more time, the loan has been cleared […] A major part of the sale offer made by Vijay is going to fund Paytm Insurtech,” Deora said.

According to Deora, PIT has signed an agreement to acquire Raheja QBE, in which Sharma and OCL are shareholders.

In July last year, OCL entered into an agreement with founder Sharma to outright buy out Mumbai-based private sector general insurer Raheja QBE. ₹568 crores, marking the entry into the insurance manufacturing segment.

The deal is still subject to approval by the Insurance Regulatory and Development Authority of India (IRDAI), the country’s insurance regulator.

“We told this to everyone. There was a purchase obligation with a timeline (for the deal). So, within time, I was tricked by a loan, so he (Raheza QBE) gets paid, which will effectively go to Paytm whenever allowed,” Sharma said. Mint Explaining the matter.

The news about Sharma’s investment in PIT comes close on the heels of Paytm’s announcement ₹Switzerland-based reinsurance firm Swiss Re on Wednesday raised Rs 920 crore ($127 million) in funding for a 23% stake in its general insurance arm.

With the launch of Paytm Insurtech, OCL now plans to manufacture general insurance products for its consumers, apart from being a distributor and broker of insurance through Paytm Life Insurance Corporation Limited and Paytm General Insurance Corporation Limited.