Paytm founder Vijay Shekhar Sharma to invest in insurance industry from IPO proceeds

The owner of Paytm One97 Communications Ltd. (OCL), which is preparing for an IPO from November 8, had previously planned to lend ??743 crore to founder Vijay Shekhar Sharma, investment entities owned by VSS Investco and VSS Holdings. As part of the transaction, Paytm was to purchase ??491.93 crore convertible option bonds for sale by VSS Holdings Pvt. Ltd, of which Sharma is a director.

The money was to be used to finance the acquisition of Raheja QBE and invest in Paytm’s general insurance business, Paytm Insuretech Pvt. Ltd (PIT), according to Madhur Deora, president and chief financial officer of One97 Communications Ltd.

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

“We are not making the loan that we envisioned from One97 Communications to VSS Holdings. In our RHP (red herring prospectus), we revealed that we are effectively avoiding shareholder approval on the loan. The original reason for the loan was for Vijay to invest in the insurance company he acquired (Raheja QBE) through Paytm Insurtech. So Vijay is actually arranging separate funding for this (acquisition), ”Deora said. mint in an interaction Thursday.

“We had certain deadlines to respect on the purchasing plans (of Raheja QBE). But now that we have more time the loan has been canceled […] A large majority of the sale offer made by Vijay will be used to finance Paytm Insurtech, ”added Deora.

According to Deora, PIT signed the agreement to acquire Raheja QBE, of which Sharma and OCL are shareholders.

In July last year, OCL and founder Sharma reached an agreement for the full buyout of Mumbai-based private general insurer Raheja QBE for ??568 crores, marking its entry into the insurance manufacturing segment.

The deal is still subject to approval by the Insurance Regulatory and Development Authority of India (IRDAI).

“We told everyone that. There was a purchase obligation with a timeline (for the transaction). So on time, I contributed with a loan, so they (Raheja QBE) get paid, which will effectively go to Paytm whenever the permissions are cleared, ”Sharma told mint explaining the thing.

Sharma’s announcement of PIT’s investment follows Paytm’s announcement of a ??On Wednesday, 920 crore ($ 127 million) was raised by Swiss reinsurance company Swiss Re for a 23% stake in its general insurance entity.

With the launch of Paytm Insurtech, OCL now plans to manufacture general insurance products for its consumers, in addition to being an insurance distributor and broker, through Paytm Insurance Broking Pvt. Ltd.