Overview of Paytm IPO Details: In the year 2000, One97 Communications, the parent company of Paytm was started with a loan of 8 lakhs. In 2010, Paytm was established as a mobile wallet through which consumers could recharge their smartphones. And in 2021, the company is on its way to launch the biggest IPO in the history of the Indian Equity market.
Seems like a story that is too good to be true. But Yes, this is the story of Paytm. The Principal Board of Paytm has given approval for the biggest IPO ever in the history of the Indian Equity Market. The total value of the IPO will be $3bn (nearly 22,000 crores). In this article, we aim to discuss the latest Paytm IPO details.
Paytm IPO Details: Is the IPO Hyped?
“Paytm is one of the established players in the Fintech space with deep market penetration and share. It started as a payments interface, has also got into alternate banking by becoming a payments bank.”
It is of prime importance for us to understand why is this IPO so hyped. Why is the Grey market of IPO so ‘Gung ho’ about Paytm IPO when Paytm is still a loss-making entity. Anyways, the losses are coming down considerably Year on Year basis.
The reason for the Paytm IPO hype is that the future seems to be bright for this e-commerce payment giant. The investment in this IPO will be more on the potential for a great business in the future.
Here are a few Paytm IPO details. The total value of the IPO will be $ 3bn (nearly 21500 crore rupees). If this IPO goes through, it will give Paytm a valuation of about $25 bn. So far the biggest IPO which India has seen is of Coal India and it was valued at Rs. 15,475 crores.
How does Paytm make money?
Paytm is India’s largest mobile payments, e-wallet, and commerce platform. It offers UPI payments, Paytm Wallet, Online recharges, bill payments, Digital gold, investment in stocks/mutual funds through Paytm Money, as well as Paytm Mall and in-store payments.
Looking into the Paytm Business Models, it makes money from two forms:
- Commissions: Paytm makes money from customer transactions while using its platform through various commissions.
- Escrow Accounts – Paytm holds assets or escrow money is held by a third party or customers and also generates revenue from them.
- Cross-Selling – Paytm also makes money by partnering with other financial institutions and banks to sell their products and services (like insurance, investments, loans etc.) along with its own.
Early Investors of Paytm
Before understanding more about Paytm IPO in detail, let us understand who are the existing and early investors and shareholders of Paytm:
- Alibaba’s Ant Group (29.71%)
- Softbank Vision Fund (19.63%)
- Saif Partners (18.56%)
- Vijay Shankar Sharma (Founder, 14.67%)
- AGH Holding, Berkshire Hathway, T Rowe Price, and Discovery Capital (holding slightly less than 10%)
More Details on Paytm IPO
Paytm IPO is likely to be opened for subscription around Diwali time (November) and has all the potential to be a blockbuster IPO. Although a loss-making entity right now, but Paytm is on track to breakeven in 12-18 months with increased financial discipline, and strategic financial investments.
In a report published by Bernstine, it said- “Paytm has come a long way from a simple digital wallet business to an integrated payments ecosystem. We believe the next stage of growth will be led by financial services, particularly delivering seamless credit tech products to consumers and merchants. 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,”
Paytm Financials Over the Years
(All the figures above are in crores)
As we can see from above, Paytm over the last 5 years has been spending much more than what they have earned. But the situation seems to be getting better and if the predictions are to be believed, it should be a profit-making entity by 2023.
Paytm IPO Details: Response from the Grey Market
The news of the IPO has received a blockbuster response from the Grey market. And the share price almost doubled with a week time. The share price was trading at Rs. 11,000 and it jumped to Rs. 21,000 within 5 days in the grey market. So, there seems to be a very positive response, at least in the grey market of the IPO.
But, we need to also be a little more cautious here because Paytm has not yet decided upon the listing price of Paytm shares. And it is possible that the price in the Grey market is very much higher than the listing price.
A similar thing happened when the IPO of Barbeque-nation, the pre-listing price was around Rs. 1,100 but the listing price was Rs. 500.
But does this robust response from the Grey IPO market means anything to Paytm Listing? Yes, very much. It has the potential of making the investor sentiment very positive. And as it is already a much-anticipated IPO, the possibility of very good listing gains becomes very high.
Is it worth investing in Paytm IPO?
To answer this question in simple “Yes”, but with precautions and after carefully looking into the real valuation at which Paytm offers its shares in the IPO. Looking at the Paytm IPO details which we have seen above, it won’t be wrong to say that we have quite a few things going in favor of the IPO.
For starters, they are backed by investors who are known for investing their money with utmost care and their money more often than not generates substantial returns. Their business model is based on what the future of e-commerce and digital banking will look like. And most importantly, they have already a huge customer base and their brand is very well respected.
From the discussion above on Paytm IPO details, we understand that apart from being one of the biggest IPO to be ever listed in the Indian equity market, this IPO has also goof tremendous response from the Pre-IPO market. Things only look bright for this digital payment and e-commerce giant.
That’s all for this post. Do let us know if you liked the provided Paytm IPO details. And are you planning to apply for this IPO or not? Comment below. Cheers!
Hitesh Singhi is an active derivative trader with over +10 years of experience of trading in Futures and Options in Indian Equity market and International energy products like Brent Crude, WTI Crude, RBOB, Gasoline etc. He has traded on BSE, NSE, ICE Exchange & NYMEX Exchange. By qualification, Hitesh has a graduate degree in Business Management and an MBA in Finance. Connect with Hitesh over Twitter here!