Paytm (One 97 Communications) IPO Review – Is it good or bad for investment?
Paytm 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|
|Profit After Tax||-42,309.0||-29,424.0||-17,010.0||-3,819.0|
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
|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.
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