An Insight On Upcoming PayTM IPO

PayTM IPO is definitely one of the most awaited IPO’s after Zomato. Hang on for just a bit, we’ll try to share our view on this IPO.

No one can be sure of what the future will be.

The line that suits all the Start-Ups

Let’s dig into PayTM now.

We have all heard about the infamous tagline (over and over again), “PayTM Karo”.

One 97 communication Limited which owns the brand Paytm was founded by Vijay Shekhar Sharma in 2001. However, one thing which needs your focus is Vijay Shekhar Sharma is only the CEO and Managing Director of the company (Paytm) not the promoter because for being a promoter your holdings should be 20% but he has only 14.97%.

A couple of months ago, Zomato was in the news because of its Ipo. The next biggest IPO (Initial Public offerings) with an issue size of 16,600 cr., is going to be Paytm which can become a living room conversation in the upcoming time.

What is PayTM IPO all about?

To begin with, In 2009 with an initial investment of 2 million dollars Paytm launched and joined the Unicorn club. In 2015 with a valuation of over $7 billion which became $16 billion in 2020. Paytm is a debt-free company with a healthy balance sheet.

As we are all aware, Digital payment got a boost in 2016, and in the upcoming years, the total mobile market is expected to grow.

PayTM has investors backing the company along the way are – Soft Bank, Alibaba Group, Ant financial (which runs Ali pay in China), and Berkshire Hathway. They Partnered with Softbank and Yahoo Japan to launch PayPay, a leading digital payment and financial service company in Japan in 2018, and PayPay currently has 38 million users. Paytm also owns 39% of PayTM payments bank and foreign subsidiaries in Singapore, in the merchant PayTM and e-commerce space.

Paytm also offers payment commerce and cloud and financial services to 333 million consumers and over 21 million merchants.

What is their main revenue source?

In Payment Services: Paytm makes revenue from transaction fees charged from merchants, convenience fees from consumers.

Financial Service: Under this service, they offer services like sourcing and collection fee from leading partners, upfront distribution fees on credit card sales, the commission in insurance policies sold, etc.

High-frequency use cases like bill payment and money transfer are the predominant means of customer acquisition.

Paytm has it’s a retail user base of 333 million and a merchant base of 21million. The company also runs advertising services and it has a variety of use cases and a long market presence. It also has a wide daily life use cases like bill payments.

What is the PayTM IPO Issue size?

One 97 communication Limited is looking to raise around Rs16,600 cr. With a fresh issue of Rs. 8,300 and the rest from the offer for sale. They intend to spend Rs 4300cr. for growing and strengthening the PayTM ecosystem including through acquisition. In addition, a whopping 2000cr. for investing in new business initiatives acquisition and strategic partnership.

Paytm has it’s a retail user base of 333 million and a merchant base of 21million. The company also runs advertising services and it has a variety of use cases and a long market presence. It also has a wide daily life use cases like bill payments.

The pertinent point which you need to know about the company is it’s not profitable yet. The competition in all the traditional spaces in the financial services industry is fierce with large incumbent players.

In addition, it is also facing tough competition from new-age brokers in the financial sector like Zerodha, Upstox, and Grow.

The company has filed DRHP (A Draft Red Herring Prospect) to SEBI and the shares are proposed to be listed on the BSE and NSE.

Conclusion:

Just because a company is currently not profitable, it doesn’t mean that it won’t be in the future. Highly invested start-ups could take years before they turn into a winning brand. On the other hand, one needs to pay more attention to the competition they are dealing with.

In addition, always do your own research because investment in any stocks can be highly risky.

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