Paytm may skip a pre-IPO round to fast-track listing
Digital financial services firm Paytm got market regulator Securities and Exchange Board of India’s (SEBI) approval for its Rs.16,600 crore initial public offer on Friday. The company expects to hit the bourses by the end of this month and is planning to skip the pre-IPO share sale rounds to fast-track listing. The proposed IPO, if successful, would be the largest such offer. The public sector company Coal India‘s Rs.15,200-crore initial public offer (IPO) in 2010 is the country’s largest one to date. Paytm is looking at a valuation of Rs.1.47-1.78 lakh crore.
According to the draft IPO documents, the company plans to raise Rs.8,300 crore through fresh issue of equity shares and another Rs.8,300 crore through the offer-for-sale route. Paytm founder, managing director, and chief executive Vijay Shekhar Sharma and Alibaba group firms will dilute some of their stake in the proposed offer-for-sale. Chinese conglomerate Alibaba group firm Antfin (Netherlands) Holding BV is expected to sell at least 5 percent stake to bring its shareholding below 25 percent to comply with regulatory requirements. At present, the Chinese firm Alibaba controlled firm Ant Group (invested in Paytm thru the Netherlands and Singapore-based subsidiaries) is having 29.71% shares in Paytm while the company’s Indian face Vijay Shekhar Sharma is learned to have 14.67% shares in Paytm, which started in India in 2016. Alibaba’s promoter Jack Ma is not in the good book of the Chinese Government and lying low for the past two years and has recently only been allowed to travel to Europe for a “study tour.”[1]
As per the draft IPO documents, investors selling stake include Antfin (Netherlands) Holding BV (which has a 29.6 percent stake), Alibaba.com Singapore E-Commerce Private Ltd (7.2 percent), and Elevation Capital V FII Holdings Ltd (0.7 percent). Moreover, Elevation Capital V Ltd (which has a 0.6 percent stake), SAIF III Mauritius Company Ltd (12.1 percent), SAIF Partners India IV Ltd (5.1 percent), SVF Panther (Cayman) Ltd (1.3 percent), and BH International Holdings (2.8 percent) will also sell the stake.
The company has proposed to use Rs.4,300 crore for growing and strengthening the Paytm ecosystem, including through the acquisition of consumers and merchants and providing them with greater access to technology and financial services. Paytm plans to earmark Rs.2,000 crore for business initiatives, acquisitions, and strategic partnerships and up to 25 percent of the total fundraised through the IPO for general corporate purposes.
According to the documents, Paytm’s merchant base grew to 2.11 crore as of March 31, 2021, from 1.12 crore in March 2019, and gross merchandise value (GMV) almost doubled to over Rs.4 lakh crore in the financial year (FY) from Rs.2.29 lakh crore in FY 2019. The company has reported a narrowing of its loss to Rs.1,704 crore in FY21, from Rs.2,943.3 crore in FY20 and Rs.4,235.5 crore in FY19. Total income declined to Rs.3,186.8 crore in FY21, from Rs.3,540.7 crore in FY20. Paytm has reported a negative cash flow of Rs.222.1 crore in FY21 primarily due to operating losses and additional working capital requirements.
References:
[1] China allows billionaire Jack Ma to travel to Europe after two years of crackdown on Alibaba – Oct 20, 2021, PGurus.com
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