India’s biggest IPO all set for listing today — How Paytm is a testament to the true Indian entrepreneurial story

The initial public offering (IPO) of Paytm, a digital payment solutions provider, is likely to be listed on exchanges on Thursday, November 18, 2021.

Once listed, it will surpass Coal India IPO, which was the biggest IPO in the history of Indian primary market until Paytm decided to make the stock market debut. Source: Reuters

The initial public offering (IPO) of Paytm, a digital payment solutions provider, is likely to be listed on exchanges on Thursday, November 18, 2021. The three-day share sale was oversubscribed 1.89 times and received bids for 9.14 crore shares against 4.83 crore shares offered. Once listed, it will surpass Coal India IPO, which was the biggest IPO in the history of Indian primary market until Paytm decided to make the stock market debut.

The Paytm IPO is coming at a time when digital payments and transactions in the country have seen exponential growth. Paytm is backed by marquee investors like Ant Financials and Softbank. The company has also attracted world’s top pension funds, superannuation funds as well as sovereign wealth funds like Government of Singapore, CPPIB, ADIA, APG, City of New York, Texas Teachers Retirement, NPS Japan, University of Texas, NTUC Pension out of Singapore, University of Cambridge.

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The company is also expected to be benefited from India's digitization push in the long run. Also, new acquisitions and strengthening of the PAYTM ecosystem will be beneficial for the company.

Paytm, which started off as a mobile wallet in 2009, has gone on to add many more businesses — Paytm Payments Bank, Paytm Payments Gateway, Paytm Payout, Paytm Money, Paytm Insider, Paytm Insurance, Paytm Postpaid (Buy Now Pay Later), Paytm for Business, Paytm Credit Cards, Paytm First Games along with utility bill payments, offline merchant payments, rental payments, content and much more. The company has also seen a huge uptick in its revenues driven by its payments and financial services offerings. The company’s revenue is up by 46% to ₹9,480 million in Q1FY22, from ₹6,494 million in Q1FY21.

From once being India’s highest valued unicorn to being the country’s largest stock market debut, the company stands as a testament to the true Indian entrepreneurial story.

Paytm will be heading to the markets with a whopping $20 billion valuation and when listed, it will be the one of India’s most valued companies.
With IPOs whose size is as large as Paytm’s, subscriptions cannot be viewed in the same way as recent internet IPOs. Paytm’s large issue also meant that its retail size is much larger in absolute terms of value than that seen in recent internet IPOs like that of Zomato or Nykaa.

What should investors do on Thursday?

Speaking of listing, Arijit Malakar, Head Research (Retail) of Ashika Stock Broking Ltd, said, "Paytm is still in a cash-burning business model and Internet/digital startups are not about profit or revenue. Paytm business model is a high-risk model, and investors who want to bet on listing gains can subscribe to it and the rest can avoid the issue due to high valuation and high business."

It is a loss-making company with a loss of Rs. 4,230.9 cr in FY19 which was reduced to Rs. 1,701 crore in FY21, said Aayush Agrawal, Sr. Research Analyst - Merchant Banking, Swastika Investmart Ltd. The analyst suggested only aggressive investors with a long-term view to stay invested in the IPO. " The grey market premium of the company was around 2% between Rs. 40 – Rs. 50 when issue opened, which is the lowest compared to most of the recently listed IPO stocks. As major portion of the issue is OFS, we expect the shares to list in a flat ambit with negative close at -5% to -10%," he said.

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