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Monday, November 29, 2021

Explained: What will Paytm use its IPO for?

Paytm IPO: The company is expecting a valuation of $20-$22 billion, and at last fundraise, it was valued at $16 billion.

Written by Pranav Mukul , Edited by Explained Desk | New Delhi |
Updated: October 24, 2021 8:09:29 am
The interface of payments app Paytm is seen in front of its logo displayed in this illustration picture taken July 7, 2021. (Reuters: Florence Lo)

Fintech major and payments bank Paytm’s parent company One97 Communications Ltd has received approval from the markets regulator to go ahead with its initial public offering (IPO), which the company claims will be India’s largest public debut.

Paytm IPO: What does Sebi’s approval mean?

A nod from the Securities and Exchange Board of India (SEBI) means the company can now go ahead and launch its IPO. Paytm, in July, had filed its draft prospectus, proposing to sell new shares worth Rs 8,300 crore, and existing shares worth as much. While the company has not finalised a timeline yet, it is expected to launch the public offering sometime next month, around Diwali.

What will Paytm use the funds for?

Paytm has said it plans to use Rs 4,300 crore of the fresh issue to expand its existing business lines and acquire new merchants and customers. The company is expecting a valuation of $20-$22 billion, and at last fundraise, it was valued at $16 billion. The company has been in discussions with some foreign investors, including Singapore’s GIC and ADIA to participate in the IPO.

Which other Indian consumer internet companies and startups have already gone public, and who’s next on the cards?

Several Indian companies operating in the consumer internet space have gone public, including food-tech firm Zomato, its early investor Info Edge, in addition to online travel agencies MakeMyTrip.com and yatra.com, which listed in the US, and e-commerce firms Infibeam and Indiamart. Online travel agency Easy Trip Planners also went public recently in India.

Up next are cosmetics firm Nykaa, logistics firm Delhivery, and online insurance aggregator Policybazaar, which are looking at an IPO to raise funds.

How should investors see start-ups, consumer internet companies?

Research analysts say each startup should be seen as a separate business, and investors should not see them as belonging to one basket. “Tech companies or startups have to be seen from the larger perspective of how wide their business opportunity is and what they can do in future,” said the research head of a leading brokerage firm.

Investment experts also say that in case of fintech companies, investors should carefully evaluate as banks have also enhanced their digital presence and have done the technology upgrades. “For companies that have not been able to clearly define their business model and keep changing their focus, investors need to practice caution,” said a senior official with a financial services firm.

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