Paytm IPO

Paytm the Quintessential App

Paytm is undoubtedly one of the fastest-growing technology companies in India. The company not only specializes in digital payment systems, but it’s also one of the most popular e-commerce and finance companies. It doesn’t matter what type of payments you need to make – paying for your groceries bill, purchasing train or flight tickets, buying fruits and vegetables from your neighborhood shop, paying tuition fee for your children, recharging your prepaid mobile, or paying for the LPG gas cylinder, you take help from Paytm.

It won’t be an exaggeration to say that Paytm has become an integral part of our day to day life. It’s so convenient to use – you just fill in the mobile number and  press ‘pay’ and in a matter of nanoseconds the money is transferred. Now, you don’t need to carry your wallet, and worry about whether you are carrying enough cash or not. You don’t need to visit the bank or the ATM kiosk to withdraw cash. With the Paytm app on your mobile, you are virtually carrying an entire bank in your pocket.

Startups Became the Game Changers

In the last 5 years, there has been a kind of digital revolution in India. Tech companies like Ola, Paytm, Zomato, Swiggy, Grofers, and Flipkart changed the way people traveled, ate, and made their daily purchases. There wasn’t even a single sector where Indian companies didn’t make a difference.

So, Ola became the biggest ridesharing company while flipkart started giving competition to global behemoths like amazon, and alibaba. A restaurant aggregator, and a food delivery company like Zomato became India’s first startup to achieve the unicorn status. It recently came up with a mega IPO with a value of more than 10000 cr. The change was also witnessed on digital platforms like Indian social media where new channels such as Trell, Vero, and Connected app disrupted the market with their innovative and user friendly features.

India’s Biggest IPO

After its unprecedented rise in the last five years, Paytm is soon planning to launch India’s biggest public issue. Currently, if we look at the digital payment system in India, mobile payment has become synonymous with Paytm. People now don’t say “Pay me through digital mode.” They simply say “Paytm this much amount to me.”

It’s not as if the company is making a huge profit. In fact, Paytm has itself admitted that it will continue to suffer losses in future. Despite such losses, the company is quite excited about its future, and only last week PayTM’s parent company One97 Communication filed a draft prospectus with SEBI for the IPO. The size of their issue will be a massive 16,600 crores which in all likelihood  could become India’s biggest IPO ever, surpassing the ₹15,475 crore issue brought by Coal India Limited way back in 2010. It was in the last week  of May, the company’s board gave in-principle approval for the IPO.

What will be the issue size?

The issue size of PayTM IPO will be of Rs 16,600 crores, while  the company will issue new shares worth Rs 8,300 crore. The existing shareholders of the company will be allowed to sell their shares for the remaining Rs 8,300 crore. Moreover, company’s founder Vijay Shekhar Sharma and current investors SAIF Partner, SoftBank Vision, Alibaba etc. can sell their shares through ‘Offer for Sale’ route. Paytm may raise Rs 2,000 crore through pre-IPO placements, thereby reducing the size of the company’s fresh issue.

When is PayTM IPO Expected ?

So far, no formal announcement has been made as to when PayTM’s public offer will be launched. However, it is expected to make its debut between September to November. According to its prospectus, the company will use Rs 4,300 crore to add new merchants and customers. At the same time, Rs 2,000 crore will be used to increase new business activity, partnership, etc.

How Good is the financial position of Paytm ?

In the financial year 2020-21, the company incurred a loss of 1701 crores while the net revenue of the company was 3187 crores. In the earlier financial year 2019-20, the company’s revenue was Rs 3350 crores while the net loss was Rs 2833 crores. Like Zomato, PayTM is still a loss making company. Therefore, according to SEBI rules, only 10% of the total issue will be kept for retail investors. In a normal IPO, usually 35% of the total issue of the company is kept for retail investors.

What Kind of Services Paytm offers ?

PayTM is short form of  ‘Pay Through Mobile’ and is a very popular fintech platform. Apart from payment gateway service, the company is also active in various payment related services, e-commerce, banking, online shopping etc. Recently, the company has strengthened its step in the finance space with new steps like PayTM Money. PayTM already runs a payment bank. Paytm started its operations in 2010 with Noida as their Headquarters. The registered user base of the company is around 35 crores. More than 2 crore merchants are using Paytm. PayTM is facing tough competition from payment platforms like PhonePe, Google Pay, WhatsApp Pay.

Should You Invest in Paytm or not?

Walmart’s company PhonePe is the market leader in terms of UPI transactions in India. In June 2021, the highest 46% of transactions done through UPI were done through PhonePe only. At the same time, Google Pay came second with 34.6% market share.In the unlisted market, there is a good demand for Paytm’s share, with reports that the company’s share price has increased by almost 250% on the news of its upcoming IPO. All this augurs well for the Paytm IPO.

Paytm is currently the number three company in terms of UPI transaction. There is no second opinion that it revolutionized mobile payments in India,  The company has mentioned in its prospectus itself that it will continue to suffer losses in the coming times. Last year, Paytm earned 32 billion US dollars while its loss was 17 billion. Despite this, Paytm is still the second most mobile payment system in the country. Therefore, investors need to consider all these factors before taking any decision.

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By Mayank

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