Digital payments firm Paytm is reportedly planning an initial public offer to raise INR 220 billion (USD 3 billion) later this year.
The Noida-headquartered company has received in-principle approval from its board for the IPO during the fourth quarter this year at an enterprise value of over INR 2 trillion (USD 27.5 billion), a report from local wire service Press Trust of India said on Sunday, citing sources.
Paytm, India’s most valued startup at USD 16 billion, has become the latest high-profile company looking to go public. Others that are eyeing an IPO this year include food giant Zomato, insurance marketplace PolicyBazaar, auto marketplace CarTrade, beauty retailer Nykaa, e-tail major Flipkart, and logistics firm Delhivery.
If Paytm’s plans go through, it would be the largest-ever listing in the Indian capital market, surpassing Coal India’s INR 154.75 billion IPO in 2010. According to industry insiders, the company’s high valuation is primarily due to the increased demand it is seeing on the back of massive digital adoption in the country amid the ongoing COVID-19 pandemic.
Japanese conglomerate SoftBank, which owns a 19.3% stake in Paytm, may sell shares worth around USD 1.5 billion, starting its first tranche of dilution in the proposed initial share sale, a report by local media Mint said.
The IPO is also likely to give a partial exit to its other existing backers, which include Ant Group, Elevation Partners, AGH Holding, T Rowe Price, Discovery Capital, and Berkshire Hathaway.
“A window to sell at least one-third of the overall stake on offer in the IPO may be available on a pro-rata basis for existing investors, including SoftBank,” said the report, adding a “total of 3-5% stake may be monetized by SoftBank.”
“Apart from the primary issuance, the rest of the funds raised during the IPO will go to existing investors who would be given secondary exits on a pro-rata basis,” the report noted. “However, there could be some investors who wouldn’t want to sell their shares during the IPO, considering there may be tax issues.”
Overall, Paytm is expected to make 10% of the shares open to the public in the proposed listing.
Founded in 2010 by Vijay Shekhar Sharma, Paytm started as a mobile recharge and bill payment platform. Now valued at USD 16 billion, Paytm has emerged as a platform offering an entire gamut of services—payments, online shopping, games, travel, movie and event tickets, insurance, mutual funds, stock trading, gold, credit cards, and loans. Paytm has also ventured into merchant management services, wherein it provides digital ledger services and payout services for small merchants and businesses. Currently, the company reportedly has 150 million active users and about 20 million merchants.
Paytm, which competes with Walmart-owned PhonePe, Google Pay, Amazon Pay, and WhatsApp Pay in the digital payments space, has been trying to come out of the red and aims to become profitable by 2022. For FY 2020, Paytm’s parent company One97 Communications, cut its losses by 30% to INR 29.4 billion (USD 405 million) while clocking revenue of INR 32.8 billion (USD 452 million).