Paytm IPO on Nov 8, expects to raise $2.4 billion

India’s largest private sector digital payment company Paytm will launch its IPO on November 8 and shares will be available for subscription till November 10.

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By Market Midas

India’s largest private sector digital payment company Paytm will launch its IPO on November 8 and shares will be available for subscription till November 10. The company wants to raise as much as $2.4 billion (Rs 18,300 crore) through this IPO, of which it wants secure investments of up to $ 1 billion through anchor investors. This IPO will be the largest in the country after Coal India’s IPO in 2010. In that the state-owned company had taken in $2.03 billion (Rs 15,200 crore) from the market.

The IPO is structured as follows: It will comprise issuance of fresh equity shares worth $1.1 billion (Rs 8,300 crore) and Offer for Sale (OFS) by existing shareholders (these are basically the initial investor funds) of $1.3 billion (Rs 10,000 crore).

The price band decided upon is pretty steep for an IPO. It will be between Rs 2,080 and Rs 2,150 per share. This puts the total valuation of the company between $19.3 and $19.9 billion. This calculation has been arrived at by Goldman Sachs India Securities.

The shares for the OFS will come from promoters. Vijay Shekhar Sharma, who is the managing director and CEO of Paytm’s parent company One97, will offload shares worth up to $53.94 million (Rs 402.65 crore) and Antfin (Netherlands) Holdings will sell shares to the tune of $643 million (Rs 4,704.43 crore).

As of now the major holding of the company was divided between Ant Group, SoftBank’s Vision Fund and Berkshire Hathaway. Ant Group is Paytm’s largest shareholder with nearly 30 per cent stake.

Paytm’s revenue from operations increased by 62 per cent in the first quarter of financial year 2021-22. The overall operations grew at a fast pace, with the company reporting (in the financial year 2021) a Gross Merchandise Value of $53 billion (Rs 4 lakh crore).

Gross merchandise value (GMV) is the total value of merchandise sold over a given period of time through a customer-to-customer (C2C) exchange site. It is a measure of the growth of the business or use of the site to sell merchandise owned by others. In other words, since the digital fintech company operates on a commission basis, a good way to show how much gorss business has been transacted will be this GMV. This will be an operational indicator, while the profit and loss indicator will be dependent on a lot of other factors, including government rules and rates that change from time to time and on which the company does not have any say in.

In the first quarter of FY’22, the company’s payments and financial services revenue alone stood at Rs 689.4 crore contributing to 77 per cent of its total revenue.

The company incurred a loss of Rs 2.9 crore in the quarter ended June 2021. Considering the growth structure, this is a small loss, also indicating that the company is on way to break-even.

In July, while filing for the IPO, the company had said that it would expect to break even in 18 months.