Digital payments provider Paytm is aiming to raise about $3 billion (around Rs 21,800 crore) in an initial public offering (IPO) later this year, which would be the country's largest IPO debut ever. The startup, backed by investors including Berkshire Hathaway, Softbank and Ant Group, plans to list in India in November around Diwali. Paytm, formally called One 97 Communications, is targeting a valuation of around $25 billion to $30 billion, as per reports.
Paytm, which is currently India’s most valued startup at $16 billion, is expected to hold a board meeting on Friday where the proposal will come up for discussion. The Paytm IPO, if it materialises, would overtake Coal India’s offering that raised Rs 15,000 crore in 2010 in the biggest IPO the country has seen so far. The IPO is likely to involve a mix of new equity issuance and a share sale by existing investors.
According to Paytm’s annual report, the company’s consolidated revenue grew a shade over 1% in 2019-20 to Rs 3,280 crore, and it pared its losses by 30% to Rs 2,942 crore. The company has forayed into financial services verticals, including mutual funds, stock trading and insurance.
According to investment research firm Bernstein, Paytm is on track to break even in 12-18 months with increased financial discipline and targeted strategic investments. "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," Bernstein said in its report.
Paytm has realigned its payments strategy around merchant payments leadership. Paytm's beneficiary UPI market share (a proxy for merchant receipts) is rising month-on-month and was 16% in April, the report said. "Combine that with its digital wallet, merchant acquiring and online merchant payments, Paytm has a total throughput of $52 billion in FY21, up 33% year on year," it added.
Paytm's credit tech vertical is likely to lead the next wave of revenue growth. "We expect Paytm's revenue base to double by FY23 to $1 billion with non-payments revenue contributing 33%," Bernstein said.
Paytm plans to set up a New Umbrella Entity (NUE) for digital payments, for which it has applied to the Reserve Bank of India (RBI) for a licence. It has joined hands with IndusInd Bank, Ola Financial Services, Zeta, and others for this purpose. The company also wants to convert its payments bank into a small finance bank to commence lending directly, as payments banks are currently barred from lending.
With IANS inputs