Paytm's Rs 18,300-cr IPO: Top 10 things to know from Red Herring Prospectus

Paytm is headed for a public market debut — a much awaited one as it is going to be the country’s largest IPO. On 22nd October, the company received the approval from SEBI for its IPO and it has now filed the Red Herring Prospectus. Digital firm One97 Communications, which operates under Paytm brand name, on Thursday confirmed that its much-awaited IPO will open on November 8 for subscription in the price band of Rs 2,080-2,150 apiece, which implies that the firm's valuation stands at Rs 1.44 lakh crore-Rs 1.48 lakh crore.

The initial public offer (IPO) subscription will close on November 10. Paytm plans to raise Rs 18,300 crore from the IPO which comprises Rs 8,300 crore from issuance of fresh equity and Rs 10,000 crore from offer for sale (OFS).

The OFS consists sale of up to Rs 402.65 crore by Vijay Shekhar Sharma, up to Rs 4,704.43 crore by Antfin (Netherlands) Holdings, up to Rs 784.82 crore by Alibaba.Com Singapore E-Commerce and up to Rs 75.02 crore by Elevation CapitalV FII Holdings. Further, Elevation Capital V Ltd will offer up to Rs 64.01 crore, Saif III Mauritius Rs 1,327.65 crore, Saif Partners Rs 563.63 crore, SVF Partners Rs 1,689.03 crore and International Holdings Rs 301.77 crore, as per the IPO document. 

Here are Top 10 things to know from Red Herring Prospectus of Paytm's IPO:-

1. Issue size increased: Paytm is headed for a ₹18,300 crore IPO — the largest market debut in India yet. It had hiked its IPO issue size from the earlier ₹16,600 crore as it received increased investor demand. 

2. Paytm adoption goes up: Paytm has seen its user base grow in the first three months of FY22. As per the company’s RHP, Paytm’s total user base has increased to 337 million registered consumers and over 21.8 million registered merchants, as of June 30, 2021. This is reflected in transacting users too - with the monthly transacting users going up to 57.4 mn, as of September 30, 2021 (a 33% YoY increase). 

3. Big jump in revenue: For the three months ended June 2021, Paytm has seen a huge uptick in its revenues driven by its payments and financial services offerings. The company’s revenue is up by 46% to ₹9,480 million in Q1FY22, from ₹6,494 million in Q1FY21. Paytm’s losses stood at ₹3,819 million for the three months ended June 2021. 

4. Payment and Financial services contribute to almost 80% of the revenue: Paytm’s bet in the financial services space has taken off as the payments and financial services vertical contributes to almost 80% of the company’s revenue.  As per the company’s RHP, for Q1FY22, the company’s payments and financial services revenue alone stood at ₹6,894 million.

5. Contribution margin goes up: Paytm’s contribution margin also rose significantly to 27.4% in Q1FY22, up from 14.9% in Q1FY21.

6. Bullish on GMV: Paytm GMV has increased from ₹697 billion in the three months ended June 30, 2020 to ₹1,469 billion in the three months ended June 30, 2021. The take rate, defined as ratio of the total revenue from operations to GMV, for the first quarter of FY 2022 was 0.61%, marginally lower compared to the previous quarter as COVID-19 affected the category mix of the company’s offline merchants (particularly with respect to offline devices subscriptions and MDR revenues) and commerce merchants.

7. Lending goes big: Paytm has been betting big on its lending vertical. And as per its RHP, it has taken off and how. The company in its RHP stated that in Q2FY22 it disbursed 2.84 million loans.

8. Merchants drive big numbers: Paytm merchant transactions have increased from 3.8 billion in FY 2019 to 5.2 billion in FY 2020, and to 5.9 billion in FY 2021, and from 1.0 billion in three months ended June 30, 2020 to 2.3 billion in the three months ended June 30, 2021. Revenue from payment services to merchants went up ₹1979 million in Q1FY21 to ₹3340 million in Q1FY22  

9. On a hiring spree: Paytm has grown its employee base as at the end of june 30, 2021 the company’s total on roll employee count stood at 10,266.

10. Expansion into international markets: The firm says while it continues to innovate and provide better products and services to its consumers and merchants in India, it believes there is a large opportunity to leverage its technology infrastructure and expand to international markets. In 2017, it piloted the bill payment services in Canada and in 2018, it partnered with Softbank Corp. and Yahoo Japan Corporation to launch PayPay, a leading digital payments and financial services company in Japan. Paytm continues to explore international opportunities, especially in the developed markets, where it can either launch its merchant services, or collaborate with partners to launch consumer facing platforms.