India’s Paytm targets $2.2bn through IPO

Paytm, the Indian digital payments pioneer backed by SoftBank Group, is seeking approval for a $2.2 billion initial public offering that could be India’s largest.

The start-up backed also by Berkshire Hathaway and Jack Ma’s Ant Group plans to raise as much as 166 billion rupees ($2.2bn) from its share sale. The IPO will include an equal amount of new and secondary shares, according to a draft red herring prospectus filed with the regulator on Friday.

Formally called One97 Communications, Paytm hopes to tap the same strong investor demand that’s propping up fellow unicorn Zomato’s hugely popular share sale. That is despite the company reporting Friday a 10 per cent drop in revenue during the year ended March 2021, after intensifying competition from Walmart’s Flipkart and Amazon.com cut its e-commerce and cloud sales by the same amount. Its core payment and financial services arm, however, grew 11 per cent.

Paytm hopes to capitalise on the rising popularity among investors of internet-based consumer companies, after the pandemic fuelled the worldwide adoption of digital technologies. BlackRock and Fidelity International were among the dozens of anchor investors that piled into Zomato’s float, resulting in the company receiving about 35 times more bids than it had expected to sell, people with knowledge of the matter said earlier.

Zomato and Paytm are coming to a market that has already been enjoying blockbuster listings for a few months. About $5.6bn has been raised in initial public offerings on Indian stock exchanges so far in 2021, according to data compiled by Bloomberg. UBS Group expects the annual tally to be more than double last year’s $4.6bn.

Paytm was last valued at $16bn, according to researcher CB Insights. If it hits its target, the IPO would be the country’s largest stock market debut ever, surpassing the more than 150bn rupees raised during the debut of state-owned Coal India.

Banks including Morgan Stanley, Goldman Sachs and Citigroup are running the share sale. Paytm may consider a pre-IPO placement of up to 20bn rupees, it said.

Paytm, led by founder and chief executive Vijay Shekhar Sharma, has been focusing on ramping up revenue and monetising its services over the past year. It is expanded beyond digital payments into banking, credit cards, financial services, wealth management and digital wallets. It also supports India’s financial payments backbone, the Unified Payments Interface or UPI. Its Paytm Mall, however, has in past years steadily ceded share to Flipkart and Amazon, which are aggressively courting merchants and buyers.

In fintech, Paytm has fended off stiff competition from a swath of global players including Walmart-owned PhonePe, Google Pay, Amazon Pay, as well as Facebook’s WhatsApp Pay. It still has the biggest market share of India’s merchant payments, with more than 20 million merchant partners in its network. Its users make 1.4 billion monthly transactions, according to numbers in a recent company blogpost.