PayTM IPO

Laxmi Khuman

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Industry & Company Profile

One97 Communications was founded in 2000 and launched Paytm in 2009, India's top digital ecosystem for consumers and merchants. It is a'mobile-first' digital payment network that allows Indians to make cashless payments.

As of June 2021, the firm had 337 million registered consumers and over 21.8 million registered merchants using its payment, commerce, and cloud services, as well as financial services.

The Paytm app offers a variety of payment choices, including Paytm payment instruments (which allow users to utilise digital wallets, sub-wallets, bank accounts, buy-now-pay-later, and wealth management accounts), as well as key third-party instruments (such as debit and credit cards and net banking).

By providing services such as selling tickets to customers, advertising, mini-app listings, channel and loyalty solutions, the company also assists merchants in acquiring and retaining customers, as well as creating demand.

In India, digital payments are fast evolving. Users transacting for online banking, mobile top-ups, in-store payments, and other services are predicted to increase from 250-300 million in FY21 to 700-750 million by FY26.

India's digital ecosystem is at a crossroads, with rising smartphone and internet usage, as well as the proliferation of digital products and services for customers.

Company Financials

Paytm is India's largest payments platform, with a gross merchandise value of Rs 4,03,300 crore in FY21 compared to Rs 3,03,200 crore in FY20, and a market share of about 40% in mobile payments transaction volume and 65-70 percent in wallet payments transaction volume.

From Rs 69,700 crore in Q1FY21 to Rs 1,46,900 crore in Q1FY22, the gross merchandise value climbed to Rs 1,46,900 crore.

The company reported a combined loss of Rs 1,701 crore in fiscal year FY21, down from Rs 2,942.4 crore in fiscal year FY20 and Rs 4,230.9 crore in fiscal year FY19. In the said periods, revenue from operations was Rs 2,802.4 crore, compared to Rs 3,280.8 crore and Rs 3,232 crore, respectively.

The loss for the quarter ended June 2021 was Rs 381.9 crore, compared to Rs 284.4 crore for the same period last fiscal. In the same period, revenue increased by 9% to Rs 890.8 crore, up from Rs 551.2 crore the previous year.

The payment and financial services business provided Rs 2,109.2 crore to income from operations in FY21, up from Rs 1,906.8 crore in FY20, and Rs 689.4 crore in Q1FY22, up from Rs 429.8 crore in Q1FY21.

In FY21, the commerce and cloud services sector contributed Rs 693.2 crore to total revenue from operations, up from Rs 1,118.8 crore in FY20, and the same in Q1FY22, up from Rs 121.4 crore in Q1FY21.

Managers and promoters

Because One 97 is a professionally managed organisation, there is no apparent promoter.

With a 27.9% interest, Antfin (Netherlands) Holding B.V. is the company's largest stakeholder, followed by SVF India Holdings (Cayman) with 17.3 percent, SAIF III Mauritius Company (11.4 percent), creator Vija (1).png

The company's Managing Director and Chief Executive Officer, as well as the Chairman of the Board, is Vijay Shekhar Sharma. Douglas Feagin (nominee of Antfin (Netherlands) Holding B.V.) is a Non-Executive Director.

Ravi Chandra Adusumalli is the Non-Executive Director (nominee of SVF). Munish Varma is the Non-Executive Director (nominee of SVF) (nominee of SAIF and Elevation Capital, collectively).

Independent Directors on the board include Mark Schwartz, Pallavi Shardul Shroff, Ashit Lilani, and Neeraj Arora.

Issue's Objectives

The net proceeds from the new issue will be used to expand and develop the Paytm ecosystem, including by acquiring and retaining customers and merchants, as well as providing them with increased access to technology and financial services (Rs 4,300 crore).

Apart from normal corporate purposes, the fresh issuance money would be utilised for new business ventures, acquisitions, and strategic partnerships (Rs 2,000 crore). Also check out - Analysts predict that IPOs would raise more than Rs 1 lakh crore next year, following a record Samvat 2077.

The money from the offer for sale will go to the selling shareholders.

Vijay Shekhar Sharma, the company's founder, would sell Rs 402.65 crore worth of shares through the OFS. Antfin (Netherlands) Holding B.V. would sell up to Rs 4,704.43 crore in shares to investors, according to Alibaba.com.

Singapore E-Commerce will sell shares worth Rs 784.82 crore, SVF Panther (Cayman) would sell shares worth Rs 1,689.03 crore, and BH International Holdings will sell shares worth Rs 301.77 crore via OFS.

Investors' Reserved Portion and Lot Size

The minimum bid lot size has been set at 6 equity shares, with subsequent lots in multiples of 6 shares. As a result, ordinary investors can pay as little as Rs 12,900 for a single lot and as much as Rs 1,93,500 for 15 lots.

Qualified institutional purchasers are eligible for up to 75% of the offer, non-institutional investors are eligible for 15%, and retail investors are eligible for 10%.

Risks to Consider

According to KRChoksey Research, there are two risks to consider before subscribing to the public issue: regulatory and execution.

"The RBI, SEBI, and IRDA are the three financial regulators that oversee the company. Any adverse decision by a regulator that can operate as a roadblock to revenue growth can have a significant influence on the valuation.

Because the best case scenario is fully priced in, any delay in execution in any of the business segments might have a negative impact on the valuation "The broker clarified.

Marwadi Financial Services also noted two risks: the company's business, revenue, profitability, and growth may be impacted if it fails to retain customers, attract new customers, and increase the volume of consumer transactions.

Failure to maintain or improve the IT infrastructure could hurt the company's bottom line and future prospects.

"Extremely competitive marketplaces with constantly evolving technology, as well as a reliance on payment services for the majority of revenue," ICICI Direct said.

Dates of Listing and Allotment

By November 15, the share allotment will be finalised, and funds will be reimbursed to failed investors by November 16. By November 17, eligible investors will get shares in their demat accounts.

With a 27.9% interest, Antfin (Netherlands) Holding B.V. is the company's largest stakeholder, followed by SVF India Holdings (Cayman) with 17.3 percent, SAIF III Mauritius Company (11.4 percent), creator Vijay Sh.png

With effect from November 18, trading in equity shares on the BSE and NSE will begin. The issue's book running lead managers are Morgan Stanley India Company, Goldman Sachs (India) Securities, Axis Capital, ICICI Securities, JP Morgan India, Citigroup Global Markets India, and HDFC Bank. The offer's registrar is Link Intime India.

Paytm plans to raise Rs 18,300 crore through a public offering that includes a Rs 8,300 crore new issue and a Rs 10,000 crore offer for sale by selling shareholders, including founders and investors.