Paytm shares draft paper for IPO: Key Takeaways

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Paytm shares draft paper for IPO. What are the key takeaways?

22 Jul 2021
- admin
Indian digital payment giant Paytm who is supported by AntGroup and SoftBank seeks approval for the India’s largest initial public offering nearly about Rs. 16600 crores.

It can be seen that Paytm reported Rs. 5200 crores in total deposits and assets under management.

Paytm accounts for more than 21 million merchants, 333 million customers and nearly 704 billion transactions and services include nearly all sorts of payment you can think of.

But what is interesting and important for the IPO is Paytm has been reporting loss since its inception even though the number of transactions and clientele seems to continuously grow. Despite the payment platform witnessing an annualized growth of 11.5% and growth from Rs. 1700 crores in FY19 to Rs. 2100 crores in FY21, it still claims to be running at loss.

It has been clearly mentioned in the draft IPO paper that the company won’t be able to turn profitable in the near future due to the rapidly changing dynamics of business.

Paytm checks the profitability on the two parameters i.e., contribution profit and gross merchandise value per monthly transacting users (GMV/MTU).

An interesting fact is that the company reported close to Rs. 2000 crores as a contribution loss in FY19 that they managed to convert into Rs. 363 crores contribution profit in FY21.

The draft also shows that GMV/MTU in rupees term has closely increased by 48%.

Who all have their exit route from this IPO?

The largest investors i.e., Chinese e-commerce giant Alibaba.com, Japan’s SoftBank, Warren Buffet’s Hathaway, and Elevation Capital are the key selling shareholders.

Facts to look for:

Bloomberg report said that Paytm could seek a valuation of around $25 billion to $30 billion.

Paytm’s mutual fund distribution and broking business under Paytm Money has also made a solid start, while the company is also looking to acquire a general insurance company to get a foothold in health and vehicle insurance.

“With increased financial discipline (rare in the hyper-competitive payments space), Paytm is on track to break even in 12-18 months. We expect Paytm to continue being the largest payments and fintech ecosystem in India,” Gautam Chhugani, Director- Indian Financials and Fintech, Bernstein.

“In the unlisted market, shares of Paytm is in high demand, company share price has increased from ₹1,000 before the news of IPO to ₹2,500 as per the market reports. We have a positive outlook for the Paytm IPO,” Yash Gupta, Equity Research Associate, Angel Broking Ltd said.

Sambhav Jain, PGPM, Class of 2022
Sources: Mint, Economic Times, VC Circle, DRHP