Paytm IPO: Investors can subscribe for listing gains, recommends Arihant Capital

The much-awaited Rs 18,300 cr initial public offer (IPO) of One 97 Communications Ltd (Paytm) will open on November 8, 2021, and close on November 10. The company has fixed a price band of Rs 2,080-2,150 apiece for this IPO.

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The offer comprises fresh issuance of equity shares worth Rs 8,300 crore and Rs 10,000 crore from an offer for sale (OFS) by existing shareholders.

Arihant Capital recommend investors to subscribe to the issue for listing gains.

At the upper band of Rs 2150, the issue is valued at a P/BV of 21.3x FY21 P/BV and 49.7x FY21 P/sales (post issue). “Rising pace of digitalization continues to present significant opportunity to grow the user base for online transactions for bill payments, shopping, entertainment, and other financial needs,” said the report.

Monetizing the large installed customer/merchant base of Paytm for broader financial service offerings, such as credit, wealth, and insurance will is the key opportunity for the company and it would lead to the profitability going forward.

The valuation of the company is on the higher side. Thus, we recommend investors' to “subscribe this issue for listing gain”, said the Arihant Capital note.

One 97 Communications Ltd (Paytm) was incorporated in 2000, is a leading digital ecosystem for consumers as well as merchants. In 2009, the company launched Paytm App, which is the 1st digital mobile payment platform to offer cashless payment services to customers.

Paytm has an addressable market in India across payment services, commerce & cloud services, and financial services. The ecosystem allows to address multiple large market opportunities at scale and gives multiple growth vectors.

Paytm is available across the country with Paytm karo (use Paytm) evolving into a verb for hundreds of millions of Indian consumers, shopkeepers, merchants, and small businesses.

The company believes the brand stands for Trust, Convenience, and Transparency.

The company intends to use the proceeds to grow and strengthen Paytm ecosystem, including through acquisition and retention of consumers and merchants and providing them with greater access to technology and financial services for Rs 4,300cr.

Investing in new business initiatives, acquisitions, and strategic partnerships - 2,000cr, and for the general corporate purpose, another Rs 2,000cr will be deployed.

(Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)