After Mobikwik, Paytm files DRHP to raise Rs 16,600 crore via IPO

Fintech major Paytm today announced it has filed DRHP with India’s markets regulator in order to raise Rs 16,600 crore ($2.2 billion) in what is expected to be the largest Indian initial public offering (IPO) in at least a decade.

The digital financial startup plans to raise Rs 8,300 crore ($1.1 billion) in new shares and sell an equal amount in secondary shares, according to the Noida-based fintech startup’s filing with the Securities and Exchange Board of India (Sebi).

The news comes just a day after Paytm’s shareholders approved the company’s plans to raise $12,000 crore through new share issuance. Paytm’s CEO, Vijay Shekhar Sharma, has also been declassified as a promoter by the shareholders because he does not own the required 20% stake in the company.

The DRHP also states that if Paytm raises Rs 2,000 crore in a pre-IPO round, as the company intends, the size of the new issue could be reduced.

China’s Ant Group and Alibaba Group Holding Ltd., as well as Japan’s SoftBank Group Corp. and Elevation Capital, are among the major investors who will be selling shares through an offer for sale (OFS).

According to ET reports, Paytm investors, particularly Ant Group, are expected to dilute their stakes in the company through an OFS in the IPO. The IPO’s OFS component will be Rs 8,300 crore.

Though the company has not disclosed the valuation it is aiming for, however, it is assumed that Paytm is aiming for a valuation of $24 billion to $30 billion.

The Paytm IPO, which is expected to hit national stock exchanges in November, will be one of the largest in dollar terms, following Coal India ($3.3 billion) in 2010 and Reliance Power ($2.4 billion) in 2008.

Before One97 Communications, the parent company of Paytm goes public on Indian exchanges, Ant Group is expected to sell about 5% of its 30.33 percent stake. This is due to Paytm’s desire to reduce Ant Group’s stake to less than 25% in order to meet Sebi’s requirements for listing as a professionally managed company.

According to estimates shared in the company’s annual report, One97’s consolidated revenue from operations fell 14 percent year on year to Rs 2,802 crore in FY21. However, losses fell to Rs 1,701 crore in FY21 from Rs 2,942 crore in FY20. Marketing and promotional expenditures fell 61 percent to Rs 532 crore, while total expenses fell to around Rs 4,783 crore from Rs 6,138 crore the previous year.

In FY20, the company also reported flat consolidated revenue as it reduced spending on discounts, cashback, and promotions, which helped reduce losses by 30% but impacted revenue growth.

Paytm is one of India’s largest digital payment companies, offering a variety of digital payment options such as unified payments interface (UPI), credit and debit card payments. It also provides wealth management services via Paytm Money and banking services via Paytm Payments Banks.

After raising $1 billion in November 2019 from T Rowe Price, Ant Group, and Softbank Vision Fund, the company is now valued at $16 billion. According to several media reports, Paytm is expected to be valued between $25 billion and $30 billion after the IPO.

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