India’s tech moment has arrived: unicorns are now landing up one after the other on Dalal Street! After Zomato, it is now Paytm’s turn. Recently, One97 Communications, Paytm’s parent company, filed its IPO papers with market regulator Sebi. The company plans to raise Rs. 16,000 crores through its public issue. This comprises a fresh issue of Rs 8,300 crore, as well as offloading of Rs 8,300 crore by existing selling shareholders. Speaking of existing shareholders, the company has several famous investors. These include firms run by Jack Ma, Warren Buffett along with SAIF, Anfin (Netherlands), Elevation Capital, and Vijay Sekhar Sharma, who is the founder of the company.
In the unlisted marketplace, Paytm’s shares are selling at around Rs 2,400 apiece. If we go by this price, the company will be valued at over $19 billion, or Rs 1.45 crore. In fact, it is reported that Paytm is eyeing a valuation of $25-30 billion. If that really comes to fruition, then the IPO price could be fixed anywhere between Rs 3,100 and Rs 3,800. What that also indirectly means is a bountiful reward for the pre-IPO investors! Bear in mind, though, that there’s a rumour going on that the company may also issue bonus shares, which may, in turn, bring down the expected price band of the IPO.
No matter the outcome, Paytm said that the fresh issue proceeds will be used for growing and strengthening the company’s ecosystem. Some of these processes are the acquisition and retention of consumers and merchants, and offering them greater access to technology and financial services. Launched in 2009, Paytm is a digital payments platform that offers cashless payments for Indians. From bill payments to mobile top-ups and Paytm Wallet, the company has built the largest payments platform in India in terms of the number of consumers, merchants, transactions, and revenue as of March 31, 2021, according to RedSeer.
If you take into account how the pandemic played a role in its growth – especially the aspect of contactless payments – the company has truly leveraged its technology infrastructure. It has offered Indians a wide selection of payment options on the Paytm app, such as digital wallets, bank accounts, buy-now-pay-later and wealth management accounts. Despite posting a loss of Rs 1,701 crore on revenue of Rs 2,802.4 crore for the financial year FY21, it is attracting the attention of investors. This could mostly be attributed to its self-reinforcing network effects, which leads to low acquisition costs, higher monetization, and lifetime value of consumers and merchants. This makes Paytm a safe bet.