Paytm signs JPMorgan, Goldman Sachs, two other banks for $3 billion IPO, BFSI News, ET BFSI



Paytm, India’s digital payments start-up, has hired four banks including JPMorgan Chase & Co. and Goldman Sachs Group Inc. for its proposed initial public offering, according to a report.

The other two bankers are Morgan Stanley and ICICI Securities Ltd.

Paytm is asking employees to decide whether they want to sell shares in the digital payments pioneer’s planned initial public offering, taking another step toward what could be the country’s largest stock market debut ever.

The startup has sent the “offer for sale” to its staff Monday as it prepares to file for the IPO.

Board approval

Paytm’s board has approved the offering plans in principle and is finalizing the draft red herring prospectus, which could be filed as soon as the first week of July.

The company, whose investors include Berkshire Hathaway Inc, SoftBank Group Corp and Ant Group Co, is seeking to raise about Rs 21,800 crore ($3 billion) at a valuation of around $25 billion to $30 billion.

The public market debut will include a mix of new and existing shares to meet regulatory obligations in India. The country’s regulations require that 10% of shares are floated within two years and 25% within five years.

The offer for sale, or OFS, will allow employees to sell their shares as part of the IPO. The documents state that Paytm’s board has given its preliminary approval to the debut, but formal approval cannot take place until the prospectus is finalised.

If existing shareholders want to sell more in aggregate than allowed during the IPO, the ability to sell stock will be determined on a pro-rata basis, according to the documents.

Bright prospects

Following the digitalisation push in the pandemic, the fintech space has garnered a lot of attention and the Paytm IPO has bright prospects.

The company had reported narrowing of loss by 40 per cent and an increase of revenue to Rs 3,629 crore on a year-on-year basis in the fiscal year 2019-20. Paytm claims to be around 30-50 per cent larger than mobile apps in the payments space with over 1.4 billion monthly transactions.

Paytm’s core payments business is growing, and it is also expanding in financial services.

Some hiccups

While analysts and brokerages have given thumbs up to the issue, there are also several red flags.

The payments company is expected to make losses for an eighth consecutive fiscal year in FY21, though the losses are expected to narrow from the previous financial year.

Revenue growth, which is critical to its reception in the public markets, is likely to take a hit as online merchant payments are still subdued because of the pandemic. The company was focusing on the segment as it offered more options to monetise than peer-to-peer payments.

Verticals like online ticketing for travel and movies have, however, taken a hit due to the pandemic.





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