Paytm’s parent company, One 97 Communication Ltd, has opened subscriptions for India’s largest first public offering (IPO). Bullish investor sentiment, good equity market performance, and rising technology penetration are all helping to propel the market forward. Paytm plans to raise Rs. 18,300 crore in a range of Rs. 2,080-2,150, valuing the business at Rs. 1.39 trillion at the top end of the range.
One97 Communications, better known as Paytm in India, is a foray into digital payments. Paytm’s network offers merchant payments and credit options in addition to its ubiquitous mobile wallet. Paytm Payments Bank is also a subsidiary of the firm. Paytm is still a loss-making enterprise after years of operation. According to BSE data, as of 10:55 a.m. on day 2, the Paytm IPO has been subscribed 21%, with the retail part booked at 0.93x. Non-institutional investors (NIIs) bid 0.02 times, and Qualified Institutional Buyers (QIBs) bid 0.06.
What are the advantages of investing in Paytm for investors?
Paytm has grown into India’s largest digital ecosystem since its inception in 2010, with a gross merchandise value (GMV) of $4 trillion in FY21. It evolved into a comprehensive payments ecosystem that includes money transfers, credit, insurance, merchants, wealth management, and e-commerce services as it grew into a “super-app.” It has 337 million clients, 21.8 million merchants, and a 40% share of the mobile transaction market. According to BSE data, scribe 21 per cent with retail component booked 0.93x. Qualified institutional buyers (QIBs) bid 0.06 times, while non-institutional investors (NIIs) bid 0.02 times.
Paytm enabled India’s digital move to a cashless economy shortly after demonetisation. After the implementation of the Unified Payments Interface in 2016, the space boomed, lowering transaction costs for Indians and making digital payments a low-cost commodity. This indicates that volume growth will continue unabated, even in the face of profitable business models such as PhonePe, Google Pay, and Whatsapp payments.
According to market experts, the premium on Paytm shares has dropped on the grey market, with a GMP of approximately 58 today. On November 18, 2021, the company’s shares are planned to be listed on the BSE and NSE, two major stock markets.
“While the values appear to be high, Paytm has become synonymous with digital payments via mobile and is the industry leader in this field.” Paytm is well-positioned to gain from the exponential 5x growth in mobile payments between FY2021 and FY2026, hence the values are justified, in our opinion.
Paytm intends to use the proceeds of the new offering to expand its business lines and attract new merchants and customers. To speed up the launch of the inaugural share offering, the company skipped the pre-IPO funding round.
Paytm’s revenue and loss ratio increase does not appear to be particularly exciting. However, by limiting branding expenses, the company has been able to reduce its losses. The future growth trajectory will be determined by acquiring new merchants and customers. Paytm’s reliance on payment services for the majority of its revenue is a major source of concern.