Paytm IPO buy or not - 9 key things to know about the company, issue
Paytm IPO: Retail investors can invest a minimum of Rs 12,900 for a single lot and their maximum investment will be Rs 1,93,500 for 15 lots.
Paytm, which is owned by One97 Communications, will launch its initial subscription offer for subscription in the coming week. It is the largest public expenditure ever in the history of Indian capital markets. Prior to that, state-owned coal mining company Coal India had the largest IPO of more than Rs 15,000 crore in October 2010.
Here are 9 important things to know before subscribing to the paytm public edition that will clear whether paytm ipo buy or not:
Table of Contents
1) IPO Dates
The offer will open to investors on November 8 and it will close on November 10.
2) Presentation details
Paytm plans to mobilize Rs 18,300 crore through its public offering which includes a new issue of Rs 8,300 crore and an offer for sale of Rs 10,000 crore by selling shareholders including founders and investors.
Founder Vijay Shekhar Sharma will sell Rs 402.65 crore worth of shares through OFS. Among investors, Antfin (Netherlands) Holding BV will sell up to Rs 4,704.43 crore shares, Alibaba.com Singapore E-Commerce will download Rs 784.82 crore shares, SVF Panther (Cayman) Rs 1,689.03 crore shares, and BH International Holdings will sell Rs 301.77 crore worth of shares via OFS.
Elevation Capital V FII Holdings and Elevation Capital V will download Rs 75.02 crore and Rs 64.01 crore shares via SAIF III Mauritius Company and SAIF Partners India IV Rs 1 327.65 crore and Rs 563.63 crore shares via OFS will sell.
Other sellers – Mountain Capital Fund LP, RNT Associates, DG PTM LP, Ravi Datla, Amit Khanna, Prakhar Srivastava, Saurabh Sharma, Manas Bisht, Sanjay S Wadhwa, SasiRaman Venkatesan, N Ramkumar and Abhay Sharma – will download Rs 86.98 crore . shares.
The company already received Rs 8 235 crore from anchor investors on 3 November, including Blackrock, CPPIB, Birla MF, GIC among other blue-headed investors.
3) Price band
The price band for the offer was set at Rs 2,080 to Rs 2,150 per equity share.
4) Objectives of Outreach
The payment service provider will use the net proceeds of its new expense to grow and strengthen Paytm ecosystem, including by acquiring and retaining consumers and merchants and offering them greater access to technology and financial services (Rs 4,300 crore ).
The new outreach funds will also be used for new business initiatives, acquisitions and strategic partnerships (Rs 2 000 crore), in addition to general corporate purposes.
The offer to buy money goes to the sale of shareholders.
5) Lot size and investors’ reserved portion
The minimum bid lot size is set as 6 equity shares and in multiples of 6 shares thereafter. Consequently, retail investors can invest a minimum of Rs 12,900 for a single lot and their maximum investment will be Rs 1,93,500 for 15 lots.
Up to 75 percent of the supply is reserved for qualified institutional buyers, 15 percent for non-institutional investors, and the remaining 10 percent is for retail investors.
6) Company Profile & Industry
One97 Communications, launched in 2000, launched Paytm in 2009, India’s leading digital ecosystem for consumers and merchants. It is a ‘mobile first’ digital payment platform to enable cashless payments for Indians. It is the largest payment platform in India based on the number of consumers, merchants, transactions and revenue as of March 2021, according to RedSeer.
As of June 2021, the company has offered payment services, trading and cloud services and financial services to 337 million registered consumers and more than 21.8 million registered merchants.
It offers consumers a wide range of payment options on the Paytm application, including Paytm payment tools (which enable them to use digital wallets, sub-wallets, bank accounts, buy-now-pay-later and wealth management accounts), and large third-party instruments (such as debit and credit cards and net banking services). The company also helps merchants to acquire and retain customers, and to create demand, by offering services such as selling tickets to customers, advertising, mini-app subscriptions, channel and loyalty solutions.
Digital payments in India have developed rapidly. Unique online transaction users, who do transactions for services such as online banking services, mobile supplements, in-store payments, etc. is expected to grow from 250-300 million in FY21 to 700-750 million at FY26.
With increasing smartphone penetration and internet use, and the proliferation of digital products and services for consumers, India’s digital ecosystem is at a turning point. Overall digital commerce (including e-commerce, e-recharge and account payments) in India is expected to grow more than 3.3 times in the next five years to more than $ 300 billion in FY26 from about $ 90 billion in FY21, according to RedSeer.
7) Finances
Paytm is the largest payment platform in India with a gross merchandise value (GMV) of Rs 4,03,300 crore in FY21 versus Rs 3,03,200 crore in FY20, with mobile payments transaction volume market share of about 40 percent, and wallet payments transaction market share of 65-70 percent. The gross merchandise value increased to Rs 1,46,900 crore in Q1FY22 from Rs 69,700 crore in Q1FY21.
The company showed consolidated loss of Rs 1,701 crore in the financial year FY21, which decreased from loss of Rs 2,942,4 crore in FY20 and loss of Rs 4,230,9 crore in FY19. Revenue from operations in the mentioned periods was Rs 2,802.4 crore compared to Rs 3,280.8 crore and Rs 3,232 crore respectively.
Loss in the quarter ended June 2021 was Rs 381.9 crore compared to loss of Rs 284.4 crore in the corresponding period last fiscal year. Revenue in the same period increased to Rs 890.8 crore from Rs 551.2 crore on an annual basis.
Payment and financial services segment contributed Rs 2,109.2 crore to operating income in FY21 compared to Rs 1,906.8 crore in FY20, and the same contribution in Q1FY22 increased to Rs 689.4 crore from Rs 429.8 crore in Q1FY21.
Vertical trading and cloud services accounted for Rs 693.2 crore to total operating income in FY21, compared to Rs 1,118.8 crore in FY20 and the same in Q1FY22 increased to Rs 201.4 crore from Rs 121.4 crore in Q1FY21.
8) Key risks
KRChoksey Research says there are two risks that are regulated and executed, which investors should consider before subscribing to public spending.
“Company falls under the competence of 3 financial regulators namely RBI, SEBI and IRDA. Any adverse move by any of the regulators that could act as an obstacle to revenue growth could materially affect the valuation. Any delay in execution in any of the business segment could potentially have a negative impact on the valuation as best case scenario has already been priced in, “the broker explained.
Marwadi Financial Services also highlighted two risks – if the company fails to retain consumers, attract new consumers, expand the volume of consumer transactions, its business, revenue, profitability and growth could be harmed. And failure to maintain or improve the technology infrastructure can harm the business and prospects.
“Extremely competitive markets with ever-evolving technology, and reliance on paid services for the majority of revenue, are two key risks,” ICICI Direct said.
9) GMP, Listing and Award Date
Paytm is available at a price of Rs 2,300 in the gray market, a premium of Rs 150 or 7 percent above the upper price band of Rs 2,150 per share, according to the IPO Watch.
The share allotment will be completed by 15 November and then the funds will be repaid to unsuccessful investors by 16 November. Qualifying investors will receive shares in their demat accounts by November 17th.
Trading in equity shares on the BSE and NSE will start on 18 November.
Morgan Stanley India Company, Goldman Sachs (India) Securities, Axis Capital, ICICI Securities, JP Morgan India, Citigroup Global Markets India and HDFC Bank are the general managers of the issue. Link Intimate India is the registrar of the offer.
Paytm IPO Valuation
One 97 is a professionally managed company and therefore does not have an identifiable promoter. Antfin (Netherlands) Holding BV is the largest shareholder in the company with 27.9 percent stake, followed by SVF India Holdings (Cayman) with 17.3 percent stake, SAIF III Mauritius Company (11.4 percent), founder Vijay Shekhar Sharma (9.1 percent), and Alibaba.Com Singapore e-commerce (6.8 percent).
Vijay Shekhar Sharma is the managing director and CEO of the company, and the chairman of the board. Douglas Feagin is the non-executive director (nominated by Antfin (Netherlands) Holding B.V.).
Munish Varma is the non-executive director (nominated by SVF), and Ravi Chandra Adusumalli is the non-executive director (nominated by SAIF and Elevation Capital, jointly).
Mark Schwartz, Pallavi Shardul Shroff, Ashit Lilani and Neeraj Arora are independent directors on the board.
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