Why RSS is wrong to suspect Paytm as a Chinese conspiracy

The economic wing of Rashtriya Swayamsevak Sangh (RSS) called Swadeshi Jagran Manch has vowed to red flag Paytm’s Chinese connections. But RSS might be better off keeping an eye on other aspects of Paytm’s shareholding than just focus on Chinese billionaire Jack Ma’s interest in it.

Company documents show that over the last few months Paytm has received cash infusions from Cayman Islands, an offshore tax haven. On September 2 this year, Paytm issued shares to a Cayman Islands based company worth $60 million or almost Rs 402 crore. Over 600,000 shares were issued to a company named Mountain Capital Fund LP whose registered address in documents is mentioned as an office at Harbour Place in Cayman Islands.

On September 12, an amount of Rs 332 crore was received by Paytm’s parent company One97 Communications Private Limited for issuing these shares.

The transaction by Mountain Capital Fund LLP was done on behalf of Mediatek, a Taiwanese semiconductor manufacturer. Mediatek is one of the biggest chipset makers in the world and has offices at Bangalore and Noida in India.

Interestingly, the basis of this deal was a valuation report prepared by Deloitte. The valuation report, seen by Business Standard, offers tantalizing prospects after initial gloom for Paytm. The report prepared in 2016 forecasts that the losses of Paytm would peak in 2017 at over Rs 900 crore and decline to Rs 142 crore in 2018. The good run for Paytm would start in 2019 when the next Parliamentary elections are scheduled in India. By 2021, the company’s profits would have touched almost Rs 750 crore.

The Rs 402 crore deal finalized on September 12 gave the Cayman Islands based Mountain Capital Fund LLP a 1.25% stake in Paytm.

This is considerably lower than other foreign investors about whom the RSS expressed its reservations. Alibaba for instance owns almost 43% in Paytm through two companies – Alibaba Singapore Ecommerce Private Limited and Alipay Singapore Ecommerce Private Limited. In addition, a Mauritius based fund named SAIF Partners, where a vast majority of employees are Indians, owns almost 31% through various companies.

Mails send to Paytm, Steven Chiou and Mediatek remained unanswered till the time of going to press.

Paytm founder and CEO Vijay Shekhar Sharma had earlier defended the Indian roots of his company saying that Patym was as Indian as Maruti. Ashwani Mahajan of the Swdaeshi Jagran Manch had later sounded a warning saying, “We have seen several reports about major Chinese stake in Paytm. Now that we are going for cashless transactions, we want to ensure the data shared by Indians is safe. No Indian company should be sharing data with foreign companies and the investment routes should be made very transparent.”

Then are other important minority shareholders, some of the biggest names among Indian corporates. Anil Ambani owned Reliance Capital Limited and Ratan Tata backed RNT Associates Private Limited own less than 1% in Paytm.

It is in this context that RSS opposition to Alibaba seems dubious. Among the shareholders, it is clear that Alibaba given its experience in digital commerce is best placed to be a force multiplier to Paytm’s success. The RSS has chosen to question the Chinese links of Paytm, rather than questioning the very feasibility of a cashless economy that PM Modi wants to transform India into.