Paytm's parent One97 Communications plans to raise INR 2,250 Cr via rights issue for payments arm, reports Q2 PAT decline

One97 Communications Limited's board has greenlit a plan to raise up to INR 2,250 Crores via a rights issue, primarily to inject capital into its payments arm, Paytm Payments Services Ltd (PPSL). This move aims to bolster PPSL's net worth, finance the acquisition of its offline merchant payment business, and cover working capital needs, thereby reinforcing its leadership in the merchant payments sector.

PPSL recently received in-principle authorization from the Reserve Bank of India (RBI) to operate as a payment aggregator. This capital infusion follows a restructuring exercise where Paytm transferred its offline merchant payments business to PPSL, aligning with new RBI regulations mandating that all payment aggregation activities be housed under a single licensed entity.

In other corporate developments, the board also approved the grant of stock options to employees and the allotment of shares under its ESOP 2019 scheme. Manisha Raj, founder and CEO of AI startup SoftHub, was proposed as an independent director, subject to shareholder approval.

These announcements coincided with the company's Q2 FY26 financial results. Profit after tax (PAT) fell sharply by 98% year-on-year to INR 21 Crores, impacted by the absence of a one-time gain from the sale of its ticketing business recorded in the previous year. However, operating revenue grew by 24% year-on-year to INR 2,061 Crores.

Impact: This strategic capital raise aims to fortify Paytm's core payments business and ensure regulatory compliance, which is crucial for long-term growth and market position. The financial results show a mixed picture, with strong revenue growth but a significant drop in profitability due to one-off items, which investors will closely watch. The stock options and new directorship could signal efforts to strengthen internal governance and employee motivation.

Impact Rating: 7/10

Difficult terms: Rights Issue: A corporate action where a company offers new shares to existing shareholders in proportion to their existing holdings. Payment Aggregator (PA): A company that facilitates online payment transactions between merchants and customers. Net Worth: The total assets of a company minus its total liabilities. Working Capital: The difference between current assets and current liabilities, representing the capital available for daily operations. ESOP (Employee Stock Option): A grant allowing employees to buy company shares at a predetermined price. PAT (Profit After Tax): The profit remaining after all expenses and taxes have been deducted. YoY (Year-on-Year): A comparison of a metric over a period of one year. QoQ (Quarter-on-Quarter): A comparison of a metric over two consecutive quarters.