Paytm (One 97 Communications) IPO Review – Is it good or bad for investment?

Check Paytm (One 97 Communications Limited) IPO details. Find IPO Date, Price, Allotment Date, Grey Market Premium GMP, Listing Date, Good or bad, should I buy, Analysis and ReviewPaytm IPO (One 97 Communications Limited IPO) Details

New Delhi based One 97 Communications (Paytm) is coming up with IPO that would open for subscription on 8th November 2021. There is no specific introduction required about Paytm. One 97 Communications Limited (Paytm) is the leading digital ecosystem for consumers as well as merchants. Company revenues are declining in the last 3 years. It incurred losses for the past 3 years. Should you invest in Paytm (One 97 Communications Limited) IPO? What are the risk factors in this IPO?  Let me do IPO review and indicate whether investors should buy or not.

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About One 97 Communications Limited

Paytm is the India’s leading digital ecosystem for consumers and merchants. Company has built the largest payment platform in India based on number of consumers, number of merchants, number of transactions and revenues.

Paytm offers payment services, commerce and cloud services and financial services to over 337 Mn registered consumers and 21.8 Mn registered merchants.

Company launched Paytm in 2009 as mobile first digital payments platform to enable cashless payments in India. Indians started using Paytm vigorously post demonetization in 2016.

We do not need much more info about this company as it is established brand and most of us aware of it.

Paytm (One 97 Communications Limited) IPO details

IPO Opening Date 08-Nov-21
IPO Closing Date 10-Nov-21
Issue Type Book Built Issue IPO
Face Value Rs 1 per equity share
IPO Price band Rs 2080 to Rs 2150 per equity share
Lot Size 6 Shares
Min Order Quantity 6 Shares
Listing at BSE and NSE
Issue Size Total Rs 18,300 Crores
OFS: Rs 10,000 Crores
Fresh issue: Rs 8,300 Crores
Book Running Lead Managers Axis Capital, Citigroup Global Markets, Morgan Stanley India, JP Morgan India, ICICI Securities, HDFC Bank and Goldman Sachs India

Paytm (One 97 Communications Limited) IPO RHP Prospectus

What is Paytm competitive strengths?

1) It is India’s leading digital payment service platform.

2) It has strong brand identity with a brand value of US$6.3 billion.

3) Company with large customer base with 333 million total customers, 114 million annual transacting users, and 21 million registered merchants.

4) Paytm Super-app to access a wide range of digital payment services over mobile phones.

 What are the Objects of the Offer?

Here are the objects of the IPO offer. Paytm (One 97 Communications Limited) IPO Size is Rs 18,300 Crores.

1) Offer for Sale (OFS) Rs 10,000 Crores: Under OFS selling shareholders would sell the shares and company would not get any proceeds from the issue.

2) Fresh issue Rs 8,300 Crores: Company would use fresh proceeds for the following:

i) Growing and strengthening Paytm ecosystem, including through acquisition and retention of consumers and merchants and providing them with greater access to technology and financial services – Rs 4,300 Crores

ii) Investing in new business initiatives, acquisitions and strategic partnerships – Rs 2,000 Crores

iii) General corporate purposes

Who is the promoter of One 97 Communications Limited?

As per RHP, Paytm is a professionally managed company with no identifiable promoters.

How is the company financial track record?

Here are the total assets, revenues and profits of the company in the last 3 years (consolidated).

Financial Year ending / Period ending (Amt in Mns)
Particulars FY19 FY20 FY21 Qtr ending 30-Jun-21
Total Assets 87,668.0 1,03,031.0 91,513.0 94,590.0
Revenues 35,797.0 35,407.0 31,868.0 9,480.0
Profit After Tax -42,309.0 -29,424.0 -17,010.0 -3,819.0
Profit % -118.19% -83.10% -53.38% -40.28%

Why to invest in Paytm (One 97 Communications Limited) IPO?

Here are the positive factors in this company.

1) Paytm is one of the India’s leading digital payment service platforms.

2) Paytm has strong brand identity with huge customer base.

Risk Factors in Paytm (One 97 Communications Limited) IPO

1) Company revenues are on declining mode in the last 3 years. Its revenues reduced from Rs 3,579.7 Crore in FY19 to Rs 3,186.8 Crores in FY21.

2) Company has been incurring losses in the last 3 years. It generated loss of Rs 4,230 Crores in FY19 Vs loss of Rs 1,701 Crores in FY21. For Q1 FY22, its incurred loss of Rs 381.9 Crores.

3) As per RHP, company states that it has history of net losses and they may not able to achieve profitability in future.

4) In future if payment processing charges payable to financial institutions and card networks increase significantly, company may not be able to pass these higher charges to merchants or customers and company may not be profitable.

5) The covid-19 pandemic and measures intended to prevent its spread can have material impact on company business.

6) Paytm offers some of the services in partnership with its group company, Paytm payments Bank. In case of any failure by Paytm Payments Bank to support such services, it can have impact on business.

7) Company receives majority of the revenues from its payment services. There is increased competition from competitors like PhonePe, Google Pay and others. Business can reduce in future if competitors eat more share from such payment services.

8) Company has experienced negative cashflows in the past.

9) Company receives majority of the revenues from its payment services.

10) Investors should read complete risk factors indicated in the RHP of the IPO document before investing in this IPO.

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Paytm (One 97 Communications Limited) IPO dates for subscription, Allotment and Listing

Offer Open 08-Nov-21
Offer close 10-Nov-21
Finalization of Allotment 15-Nov-21
Initiation of Refunds 16-Nov-21
Credit to Demat Account 17-Nov-21
IPO Shares Listing Date 18-Nov-21

Is Paytm (One 97 Communications Limited) IPO Price is underpriced or overpriced?

Paytm share price band is Rs 2,080 to Rs 2,150 per share.

Since company is incurring losses in the last 3 years, we cannot compute P/E ratios and cannot ascertain whether the issue price is underpriced or overpriced.

What is Paytm (One 97 Communications Limited) IPO Grey Market Premium?

GMP is nothing but the premium at which the shares are trading in offline market. This is just an indication about IPO price as it is unorganized market.

Currently Paytm (One 97 Communications Limited) IPO GMP is not available as there are no trading’s happening as of the day of writing the article.

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Paytm Limited IPO – Review and Conclusion

Is it good or bad to invest in Paytm (One 97 Communications Limited) IPO?

Paytm is the India’s leading digital services payment platform. It has strong brand identity and large base of customers and merchants.

Company’s revenues are on declining mode in the last 3 years. It is incurring losses in the last 3 years.

Since it is incurring losses, we cannot compute P/E ratio and we do not know whether the issue price is underpriced or overpriced.

Except for the strong brand and large revenue base (which is on declining mode), there is nothing exciting about the company.

There is so much hype being created in media about this IPO. I know that investors would get tempted, would apply and even this IPO would get oversubscribed.

Investors should avoid such IPOs as of now. Investors can wait and watch how markets would react for such large IPOs and in future if there are any correction in Paytm Share prices, they can review one more time and consider for investment.

Did you like our IPO Analysis, then share it with your friends on WhatsApp, FB, Twitter and Telegram?

Suresh KP

20 comments

  • Kamal Garg

    Despite the hype and hoopla created by the media and PR of the Company for subscription to their IPO, the issue was oversubscribed by only 1.89 times which is definitely a lackluster performance. Even the HNI quota was subscribed only to 24% of the quota fixed.
    It only conveys that the analysis done by Mr. Suresh is perfect and correct and guides we all in helping to take right decision on investment.

  • R Ramakrishna

    I liked the Analysis.

  • Biswwaraj Nayak

    One really needs guts to call spade a spade. Thanks for this honest, and unbiased write up. Profitability seems to be an impossible task for PayTM as
    1. The space is over crowded and levying charges on UPI transactions is subject to govt regulation.
    2. Card transactions will decline with the popularity of UPI and QR code payments.
    3. Paytm Payments Bank has not yet won the trust of the merchants as a bank.
    4. All the investors and promotors are eagerly waiting to dilute their holdings to get an escape.
    5. Paytm has a 337 mn registered users, but how many of them are active users ? The percentage must be very low. In my personal circle, most of the people use Phonepe and Google pay.
    6. Entry of whatsapp into this space has made the competition more tough. If Whatsapp’s trial launch of Whatsapp Business Directory succeeds, it will disrupt the market. Keepin in mind the vast ecosystem built by whatsapp business accounts, success is highly probable.
    7. Dukaan tech apps like my store, Dukaan, and billing softwares like Marg are too promoting their own payment options.
    I totally agree with you that one shouldn’t invest in Paytm at present.

  • Prabhu

    What told is right,continuos loss making venture shouldn’t orphan the new investors.
    A suitable review.

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