Munish Varma, a SoftBank executive, is stepping down from the boards of Paytm and PB Fintech today

According to a source familiar with the situation, Munish Varma, Managing Partner of Japan’s SoftBank Group, and former SoftBank executive Kabir Misra will leave the boards of the recently listed companies Paytm, owned and operated by One97 Communications Ltd, and PB Fintech Ltd, parent of PolicyBazaar.

The decision is in accordance with the Japanese conglomerate’s policy of requesting top executives to resign from company boards after they are listed, as it provides them more “global freedom of alternatives,” according to the individual quoted above, who spoke on the condition of anonymity. According to the individual, the two companies will soon make obligatory filings to the stock exchanges.

Moneycontrol was the first to publish the news, citing unidentified sources.

Munish Varma has been on the boards of both firms, although Kabir Misra was named to Paytm’s Board of Directors in 2017. According to the person, SoftBank, which owns major minority investments in PB Fintech and One97 Communications, will not sell any of its stock. Paytm has a 17.5 per cent investment in SoftBank, and PB Fintech has a slightly less than 13 per cent holding.

SoftBank has invested approximately $14 billion in Indian technology firms, the majority of it in the previous five years, and its portfolio includes some of the country’s most valuable technology startups. SoftBank would invest over $3 billion in 17 projects in 2021, according to Vikas Agnihotri, Operating Partner, SoftBank Investment Advisers, who spoke at the Mint India Investment Conference on Monday.

Paytm and PB Fintech, two of the Japanese conglomerate’s largest portfolio firms, were both listed on Indian stock exchanges in 2021, which was a record-breaking year for IPOs in India. During Paytm’s initial public offering, SoftBank sold shares worth Rs 1,689 crore, while PolicyBazaar sold shares worth Rs 1,875 crore.

The public’s reaction to the two businesses’ initial public offerings was mixed, with PB Fintech’s stock soaring more than 25% on its first day on the market and Paytm’s stock plunging more than 20%.

Furthermore, Paytm, which raised Rs 18,300 crore in a mix of primary and secondary share sales to become India’s largest-ever IPO, has failed to inspire public shareholders since then. The stock has lost more than 70% of its value since its IPO, destroying two-thirds of the company’s market capitalisation.

The stock dropped more than 12% on Monday after the Reserve Bank of India (RBI) stopped Paytm’s Payments Bank from onboarding new customers due to infractions of know your customer rules (KYC). Paytm Payments Bank is owned by One97 Communications, which has a 49 percent stake. In numerous media interviews on Monday, Paytm Founder Vijay Shekhar Sharma stated that the business is confident in its ability to comply with RBI regulations and that the prohibition on onboarding new consumers will be lifted soon.

Sharma’s statements, however, did nothing to calm public investors, as the stock fell 6.90 percent to Rs 628.25 per share at 11:10 IST on Tuesday.

Furthermore, public shareholders have raised concerns about the profitability of new-age digital companies such as Paytm, which has posted expanding net losses over the last two quarters. Paytm recorded a consolidated financial loss of Rs 778.5 crore for the quarter ended December 2021, compared to Rs 535.5 crore a year earlier.

Public shareholders have dropped shares of PB Fintech, similar to Paytm, due to concerns about the company’s road to profitability. PB Fintech recorded a net loss of Rs 297 crore for the quarter ended December 2021, up from Rs 18 crore the year before.