(Only cash surplus and risk seekers may Subscribe)
| Issue Size- 85 mn – 88 mn shares | Issue Open/Close – Nov 08/Nov 10, 2021 |
| Price Band (Rs) 2080- 2150 | Issue Size- Rs 183 bn |
| Face Value (Re.) 1 | Lot Size (shares) 6 |
One 97 Communications Ltd (Paytm) is India’s leading digital ecosystem for consumers as well as merchants. The company offered payment services, commerce & cloud services, and financial services to 337 million registered consumers and over 21.8 million registered merchants as of June 30, 2021.
The company have the largest payments platform in India with a GMV of Rs 4,033 bn in FY21. It also has an overall mobile payments transaction volume market share of approximately 40 pct and wallet payments transaction market share of 65 – 70 pct in India as of FY 2021. The company’s commerce and cloud services offerings provide a lifestyle destination for consumers to avail lifestyle commerce services such as ticketing, travel, entertainment, gaming, food delivery, ride hailing and more. The company’s financial services offerings include mobile banking, lending, insurance, and wealth management for consumers and merchants.
In 2009, the company launched the first digital mobile payment platform, “Paytm App” to offer cashless payment services to customers and now, it became India’s largest payment platform and the most valuable payments brand with a total brand value of USD 6.3 bn as per Kantar BrandZ India 2020 Report. The company had an average engineering and technology team of 2,550 members and 2,471 members in FY 2021 and in the three months ended June 30, 2021.
Paytm is the only payments company in India that, together with their affiliates, owns each layer of the payment stack. It offer services such as Paytm Wallet, Paytm QR, Paytm Soundbox, Gold investments and Fixed Deposit, Paytm Postpaid, Merchant Cash Advance and FASTag.
Objects of the Issue
- Growing and strengthening Paytm ecosystem, including through acquisition and retention of consumers and merchants and providing them with greater access to technology and financial services.
- Investing in new business initiatives, acquisitions and strategic partnerships
- General corporate purposes
Competitive Strengths
- Their ecosystem allows them to address large market opportunities.
- Trusted brand, scale and reach.
- Insights of Indian consumers and merchants.
- Network effect creates sustainable advantages for company.
Key Risks
- Failure to retain the consumers, attract new consumers, expand the volume of transactions from consumers may impact its business, revenue, profitability and growth.
- Failure to maintain or improve the technology infrastructure could harm the business and prospects.
- It may not be able to achieve profitability in the near term and as its operating expenses will keep rising resultantly it may increase its losses going forward
Valuation
One 97 Communication (Paytm) is play on digitisation of various financial services including payments, investments & financial solutions. The Company enjoys the largest customer base as of June 30, 2021. However, based on its financial parameters, its valuations are pretty high. As per the RHP, the company is not likely to turn to make profits in the near term. At the upper end of the price band, the company is valued at ~9.5x post-issue BV and at 24 pct of annualised GMV. With an average yearly turnover of Rs 35 bn (with negative earnings), the Company is seeking valuations of Rs 1.39 trillion. The issue is highly-priced considering all parameters and is discounting all near-term positives. Plus rising competition in this space is an additional threat. However, considering interest in Unicorn IPOs, this issue may sail through. Thus, only cash surplus and risk seekers may consider an investment with a long term perspective.
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Disclaimer: The views shared in blogs are based on personal opinion and does not endorse the company’s views. Investment is a subject matter of solicitation and one should consult a Financial Adviser before making any investment using the app. Making an investment using the app is the sole decision of the investor and the company or any of its communication cannot be held responsible for it.
