One97 Communications was incorporated in December 2000. The company is a leading digital ecosystem provider for consumers as well as merchants. It plans to raise Rs 16,600 crores through an initial public offer (IPO). Of this, Rs 8,300 crores would be against the fresh issue of equity shares. In addition, the existing investors will make an offer for sale to the tune of the remaining Rs 8,300 crores. Here is all you want to know about the Paytm IPO as Paytm files for the biggest IPO in recent times in Indian history.
- The company offers payment services, commerce and cloud services, and financial services to over 333 million consumers and over 21 million merchants as of March 31, 2021
- Paytm, launched in 2009, enables cashless payments for Indians, giving them the power to make payments using mobile phones
The company provides a two-sided digital ecosystem that enables commerce. Its services include access to financial services by leveraging technology to improve the lives of consumers and merchants.
Paytm started with bill payments and mobile top-ups, and Paytm wallet as the payment instrument. Gradually, the company has built one of the largest payments platforms in India based on the number of consumers, merchants and transactions as of March 2021.
|Launch of Paytm allowing prepaid users to top up mobile accounts and shop directly using bank credit and debit cards
|Launch of payment gateway
|RBI license for a semi-closed wallet
|Launch of Paytm wallet app for iOS and Android
|Issuance of license to Paytm Payments Bank by the Reserve Bank of India
|Launch of Paytm FASTag
|Issuance of certificate of registration to Paytm Money Limited by SEBI to act as a stockbroker
|Issuance of certificate of registration to Paytm Insurance Broking Limited by IRDAI
|Launch of the mini-app store to support Indian developers
Through the Paytm app, the company offers its consumers innovative and intuitive digital products and services. There are a variety of Paytm options, like:
- Paytm payment instrument – allows the use of digital wallets, bank account, wealth management accounts, etc.
- Third-party instruments – debit and credit cards and net banking
Let us understand the company offerings from the perspective of consumers as well as merchants.
Through the Paytm app, the consumers can conduct several transactions. Some of the examples are:
- In-store merchant payments
- Bill payments
- Mobile top-ups
- Transfer money
- Check linked account balances
- Make governmental and municipal payments
- Buy entertainment and travel tickets
- Play online games
- Access digital banking services
- Purchase insurance products
- Make investments, and more
Paytm helps merchants grow their business by providing solutions that allow them to accept payments online. In addition, these digital services help merchant partners to retain customers, improve their business operations and access financial services.
Merchants can use in-store and online payment solutions to accept payments through Paytm payment instruments. In addition, major-third party payment methods are also acceptable.
Paytm offers services like selling tickets, advertisement, mini-app listings, and loyalty solutions for better customer acquisition and retention.
Further, software and cloud services allow merchants to improve business operations and access critical financial tools such as banking, wealth and credit facilities.
The industry landscape – significant tailwinds
India is home to millions of underserved young consumers in terms of payments and financial service products. Similarly, millions of small businesses are likely to benefit from affordable software, technology and financial services. The company believes technology-led digital services can help both ends.
There is a large addressable market in India and there exists considerable growth potential due to under penetration. Similarly, effective use of technology can further help grow and expand the market.
Macro economic tailwind
India continues to be the fastest-growing major economies in the world. The country derives its demand from rising consumption, favourable demographics, a large working population and growing urbanization.
An ever-increasing pace of digitization
A significant increase in smartphone penetration and internet usage provides enormous growth opportunities. Above all, more and more new users (new with a smartphone or with the internet) will transact online for bill payments, shop, and prefer to go digital.
Rapidly evolving digital payments environment
India’s payment landscape is transforming with the emergence of mobile payments. The government of India’s vision to transform India to reduce cash transactions provides the necessary support. In other words, innovation in deploying robust payment infrastructure, consumer and merchant acceptance of newer ways of transacting all act in favour.
Under penetration of digitization in financial services
The financial services market in India is highly under-penetrated, and even less when you apply the digitization lens.
Necessary regulatory support exists
The key regulators of the Government of India act as enablers of “Digital India” through their reforms and encourage innovation. These agencies include the Securities and Exchange Board of India (SEBI), Reserve Bank of India (RBI) and Insurance Regulatory and Development Authority of India (IRDA).
Paytm is significantly banking on the industry tailwinds for its future growth.
About the business
One97 Communications offers services across payment services, commerce and cloud services and financial services
Payment Services for both consumers and merchants to enable them to make and receive payments. As per the draft prospectus, the company has a 40% market share in transactions payment volume and wallet payments market share of about 65-70%.
In the Commerce and Cloud Services, the company provides consumers with lifestyle commerce services like ticketing, travel, entertainment, gaming, etc. Easy access to such services, according to the company, plays an essential role in user engagement and retention.
The company also offers innovative offerings in Financial Services. These include mobile banking, lending, insurance, and wealth management services. These services were recently launched and there exists significant growth potential.
Below table demonstrates the growth in gross value of payments made through the Paytm app over the last three years.
GMV = value of total payments made to merchants on transactions conducted through the app. However, it excludes and money transfers between consumers
Below is the condensed financial information of One97 Communications Limited.
Comparison with other industry peers
There are no listed companies in India that engage in a business similar to that of the company. Therefore, peer comparison is not possible.
|Offer for sale
|Rs 8,300 Cr
|Rs 8,300 Cr
|Gross issue size
|Rs 16,600 Cr
Utilization of proceeds:
- Growing and strengthening the payment ecosystem (approximately Rs 4,300 Crs)
- Investing in new business initiatives, acquisitions and strategic partnerships (approximately Rs 2,000 Crs)
- General corporate expenses
Key selling shareholders
Below are key seller shareholders:
|Mr Vijay Shekhar Sharma
|Antfin (Netherlands) Holdings B. V.
|Alibaba.com Singapore E-commerce (P) Ltd.
|Elevation Capital V Limited
|Elevation Capital V FII Holdings Limited
|SAIF III Mauritius Company Limited
|SAIF Partners India IV Limited
|SVF Panther (Cayman) Limited
|BH International Holdings
One97 Communication Ltd. is yet to announce the pricing and date of the IPO
The information provided in the red herring prospectus filed by the company with the Securities and Exchange Board of India (www.sebi.gov.in) is the basis for this note. However, I recommend that the reader validate the data before making any financial decision. Also, investment in an initial public offering (IPO) is subject to market risks. Therefore, it should be evaluated, keeping your risk profile and investment objective in mind. The author will not be responsible for any financial loss or otherwise resulting from any action taken based on the above.Click here for information on alternative investment options.
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