Files DRHP for the issue; large, high-profile investors to sell part of their shares
Digital payments firm, Paytm, which on Friday filed its draft red herring prospectus (DRHP) with the Securities and Exchange Board of India (Sebi) for an aggregate offer size of Rs 16,600 crore via an initial public offering, would see most of its large as well as high profile backers like SoftBank, Ratan Tata, Warren Buffet’s Berkshire Hathway Holdings, Saif Partners (now Elevation Capital), Ant Group, Alibaba, etc, selling a part of their shares.
The IPO, which would be the largest since the 2010 issue by state-owned Coal India, would see the company raising Rs 8,300 crore through fresh equity and another Rs 8,300 crore through offer-for-sale.
Paytm’s large investors include China’s Alibaba and Ant Financial, which own a combined 36.8% stake, followed by SoftBank Vision Fund, which owns 19.6%. Saif Partners owns 17.2%, according to the filing. The filings said that founder Vijay Shekhar Sharma also plans to sell a portion of the 14.6% stake he owns.
Tata group chairman-emeritus Ratan Tata owns 75,000 shares through RNT Associates in the company which translates into around 0.5% stake.
Paytm has said that it is currently a foreign-owned and controlled company and would continue to be so after the IPO in accordance with the consolidated FDI policy and foreign exchange rules and would be subject to Indian foreign investment laws.
The Noida-based fintech start-up has said that it retains the option to undertake a pre-IPO placement to raise up to Rs 2,000 crore subject to relevant approvals. If the pre-IPO placement is completed, the fresh issue size will be reduced to that extent. Those who invest in the pre-IPO round would not be allowed to sell their shares for a year.
Paytm intends to deploy about Rs 4,300 crore garnered from the IPO proceeds to fund customer acquisition, a key to growing the market share, expand its network of merchants and build on its technology capabilities. Around Rs 2,000 crore will be used to invest in new business initiatives and ink acquisitions, strategic partnerships.
Currently, the second valued start-up after Byju’s at $16 billion, Paytm’s bouquet of services reached 333 million consumers and catered to 21 million merchants as of March 31, 2021. Analysts at Bernstein believe the next stage of Paytm’s growth will be led by the financial services segment, particularly delivering seamless credit tech products to consumers and merchants. They estimate Paytm’s revenue base to double to nearly $1 billion by FY23 with non-payments revenue contributing about 33%, led by credit tech.
With increased financial discipline and targeted strategic investments, Paytm is on track to break-even in 12-18 months, analysts at the firm said in a late May report.
According to RedSeer, Paytm is the largest payments platform in India with a GMV (gross merchandise value) of Rs 4,033 billion in FY21. The company is estimated to have an overall payments transaction volume market share of nearly 40% and wallet payments transaction market share of 65-70% in India as of FY21.
Paytm’s revenue from operations declined to Rs 2,802.41 crore on a consolidated basis in the year ended March 31, 2021, from Rs 3,280.84 crore in FY20, according to the company’s annual report released earlier. The firm, however, managed to narrow its total losses to Rs 1,701.01 crore in FY21 from Rs 2,942.36 crore in the previous year as it kept a check on its costs. Total expenses decreased to Rs 4,782.95 crore in FY21 from Rs 6,138.23 crore in FY20. The company has made a net loss for the past three years and expects this to continue in the foreseeable future.
The company has said that it has proposed to give a loan of around Rs 492 crore in the form of optionally convertible debentures to VSS Holdings, which is 100% owned by its founder Vijay Shekhar Sharma.