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Paytm not looking to go public anytime soon

It raised USD 1 billion late last year at a valuation of USD 16 billion.

Image credit: Avanish Tiwary

At a time when the talk about exits among investors and entrepreneurs is gaining heat, Vijay Shekhar Sharma, founder of one of the most valuable Indian startup Paytm told reporters Wednesday in Mumbai that the company is not looking for a public listing anytime soon.

“IPO is not even a logical discussion now and that’s not what investors have come in for. We are an Indian company. I would rather stay private and try to become profitable,” he said.

This is in stark contrast with what Sharma had said last year about the prospects of Paytm filing for an IPO. “The plan was always to start thinking of an IPO 2022 onwards. I have always wanted to go for an IPO (initial public offering) after the company starts generating cash,” Sharma had said during the India Mobile Congress event in New Delhi.

As much as investors and entrepreneurs are aiming for their companies to go public at some point of time, the tragic tale of how WeWork had to cancel its IPO last year, is a constant reminder for everyone to not go public prematurely. WeWork’s debacle, coupled with how cab-hailing giant Uber Inc’s shares plummeted in the days following its much-hyped IPO, has made investors question the hyper-valued technology companies globally.

Ant Financial-backed payments company currently valued at USD 16 billion in November 2019 raised a round of funding to the tune of USD 1 billion led by US asset manager T Rowe Price with participation from existing investors including Ant Financial and SoftBank Vision Fund. While SoftBank put in USD 200 million, Ant Financial invested USD 400 million in the Noida-based digital payments company.

In November, days before the investment announcement, SoftBank had put a clause, that Paytm must file for an IPO in the five years’ time from the date of investment, failing which it will be free to sell the shares to a rival company.

Paytm expanded its net loss by 163% to USD 587 million in the financial year 2019 from USD 223 million in FY 2018.

To be sure, Paytm has begun to cut down on the cashbacks to narrow down its burgeoning losses. Instead of handing out cashbacks, Paytm now provides discount coupons to users which they can only use on Paytm to buy tickets or pay for bills—ultimately making the users spend the money on its own ecosystem of services.

Eyes set on banking

A large chunk of the billion US dollars that Paytm raised will be used in increasing its capabilities in its Payments Bank unit called Paytm Payments Bank—a special banking license given to 11 companies by RBI to set up banks to cater to the needs of unbanked with limited features. Payments banks in India can’t lend money to its users and can only take deposits of maximum INR 100,000 from a user.

During his talk with journalists in Mumbai, Sharma cleared the rumor that made rounds last year claiming him buying stakes of a well-known Indian banker Rana Kapoor in Yes Bank.

“It wasn’t confirmed or correct. If we as a group have a bank and, I as a chair of the bank, own 51% of the bank, it sounds too far-fetched for an individual or company (to pick up Kapoor’s stake),” he said.

A Mint report said Paytm Payments Bank has been profitable over the last 2 years and has added 50 million customers so far.