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Swiss Re to invest Rs 920 cr in Paytm Insuretech
Photo Credit: VCCircle

Paytm Insuretech Private Limited (PIT), the insurance arm of One97 Communications which runs payments platform Paytm, on Wednesday announced it has entered a strategic partnership with Swiss reinsurance company Swiss Re.  

As part of the partnership, Swiss Re will invest via equity shares and compulsorily convertible preference shares. The firm will invest Rs 920 crore; Rs 3,97.3 crore will be upfront and the remaining tranches will be subject to certain milestones in Paytm Insurtech for an aggregate stake of 23% on a fully diluted basis.

Paytm Insuretech said it plans to leverage Paytm’s customer base and merchant ecosystem to develop insurance products and offer solutions.  

“We are excited to partner with Swiss Re for our insurance foray as a key strategic investor. It is an important milestone in our financial services journey of taking general insurance products to the masses. We look forward to gaining from Swiss Re’s global insurance capabilities and building innovative products to tap into the Indian market,” Vijay Shekhar Sharma, chairman, MD & CEO of One97 Communications, said.

Swiss Re is investing alongside Paytm’s Vijay Shekhar Sharma.  

The announcement follows the acquisition of Raheja QBE by Paytm Insuretech Pvt. Ltd. The investment by Swiss Re and the acquisition of Raheja QBE by Paytm Insuretech Pvt. Ltd is subject to regulatory approvals.

As per RedSeer data, India’s insurance market presents a significant opportunity, given the market's protection gap and under-penetration compared to the global average. Gross written premium for non-life insurance is expected to increase from $27 billion as of FY21 to $50- 60 billion by FY26.  

The stategic investment from Swiss RE comes after Paytm received a nod from the Securities and Exchange Board of India (SEBI) for its Rs 16,600 crore initial public offering (IPO).  

SoftBank and Alibaba’s Ant Financial-backed One97 Communications, the parent company of fintech platform Paytm, is planning for a mid-November listing  

In July, One97 Communications sought the securities regulator’s approval for its Rs 16,600 crore IPO, expected to be one of the country’s largest public listings.   

The mobile wallet-turned-payment banking services player is expected to use the proceeds for growth including customer and merchant acquisition and investing in new business initiatives, acquisitions, and strategic partnerships.  

In November 2019, One97 Communications raised $1 billion from new and existing investors including SoftBank Group in a move that valued Paytm at $16 billion.  

The company has also been active in mergers and acquisition space, earlier this month, Paytm acquired a 100% stake in Urja Money Pvt Ltd, which provides a loan management system through its proprietary solution, CreditMate.   

This week, another regulator Reserve Bank of India (RBI) imposed a penalty of Rs 1 crore on Paytm Payments Bank, run by One97 Communications, for violation of remittances law.   

Last month, Paytm roped in former KPMG partner Rajendra Nalam as senior vice-president of the corporate finance function to overlook Paytm’s newer initiatives, special projects, joint ventures, and acquisition strategy.

Patym’s earlier attempt at IPO was shelved due to market volatility in 2010 when it was a value-added service (VAS) provider for telecom consumers and it had planned to raise Rs 120 crore ($28 million basis a decade old conversion rate) through an IPO.  

According to the draft papers, its net losses narrowed to Rs 1,704 crore in FY21, from Rs 2,943.3 crore in FY20, and further from Rs 4,235.5 crore in FY19.  

In two years Paytm's merchant base increased to 2.11 crore as of March 31, 2021, from 1.12 crore in March 2019. Its gross merchandise value also almost doubled to over Rs 4 lakh crore during the last fiscal year ending March 2021 from Rs 2.29 lakh crore billion in FY19.  

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