•IPO values loss-making Paytm at $25 to $30 billion
•Paytm’s payments platform has 333 million users
India’s digital payments giant Paytm hopes to raise up to $2.2 billion in what may be India’s biggest IPO this year.
The company, which filed its prospectus last week, is poised to enter the market at a bullish time, after food-delivery company Zomato’s $1.3 billion IPO was more than 38 times oversubscribed when it closed last Friday.
More than half a dozen other start-ups aim to float by year-end, underscoring investor enthusiasm for the prospects of India’s digital companies. Already this year, about $5.6 billion has been raised in initial public offerings on Indian stock exchanges, according to Bloomberg.
Here are five things you need to know about India’s biggest IPO in at least a decade:
1 It’s backed by Buffett…
Legendary investor Warren Buffett chose Paytm as his first investment in India, a remarkable seal of approval for a company that has lost money every year since its inception in 2010. Buffett’s Berkshire Hathaway acquired a 2.8% stake in Paytm parent, One97 Communications Ltd., in 2018. Berkshire Hathaway’s investment manager Todd Combs, who led discussions on the investment, sat on Paytm’s board until stepping down in a recent rotation.
2 …And by Jack Ma, Masayoshi Son
As if onboarding the world’s most famous investor wasn’t enough, Paytm’s also snagged a who’s who of tech titans, from China’s Jack Ma (via Alibaba Group with an 18.7% stake and Ant Group with 30.3%) to Japan’s Masayoshi Son (18.7% via the SoftBank Vision Fund). All those investors plan to trim their stakes during the IPO, reaping bumper profits from their initial investments.
Founder Vijay Sharma is left holding just 14.5%, which means Paytm’s a foreign-owned and controlled company that’s subject to India’s foreign investment laws.
3 Its Hemorrhaging Red Ink
Paytm’s hemorrhaged red ink since its inception in 2010. It recorded a loss of $2.21 billion in the year through March, down from $3.8 billion a year before and $5.5 billion two years ago. Paytm’s not ready to predict that it’s on the verge of profitability either. Its prospectus says it expects to continue incurring losses for the foreseeable future as expenditure increases with the hire of additional staff and operations expand. Despite that, and consolidated revenues that shrank 11% to $420 million in the year through March, it’s being valued by the offer at $25-$30 billion.
4 And Faces Tough Competitors
Paytm’s facing some tough competitors backed by big foreign players in the world’s second-largest internet market. Walmart-owned PhonePe and Google Pay account for about 80% of payments made via India’s United Payments Interface while Paytm accounts for just 15%.
5 But Has a Huge User Base
So what’s its appeal? Paytm has signed up about 21 million merchants and 333 million users to its platform. About 114 million users make at least one transaction annually, while 50 million make at least one transaction a month.
‘’It’s a play into mass-market digital financial services,’’ says Sanford C. Bernstein & Co. analyst Gautam Chhugani in Mumbai. ‘’It gives investors access to one of India’s fast-growing verticals, which is digital payment.”