India’s very own digital payment system Paytm, formally known as One97 Communications, will begin its initial public offering for subscription from November 8, 2021, which will be India’s largest ever since Coal India. D-ST will start.

BlackRock, the world’s largest asset manager, Canada Pension Plan Investment Board and sovereign wealth funds of Singapore and Abu Dhabi have emerged as anchor investors for the $2.46 billion (Rs 183 billion) IPO. The company is selling almost half of its IPO to anchor investors.

Big investors, including Jack Ma’s Ant Group, Masayoshi Sun’s SoftBank Corp, are selling their shares. Paytm is expected to be listed in mid-November. Here are some key details that investors can keep in mind:

1. Issue opens on November 8, 2021 and closes on November 10, 2021
2. The issue size is Rs 18,300 crore. The fresh issue is worth Rs 8,300 crore while the offer for sale is Rs 10,000 crore
3. The price band for the IPO has been fixed at Rs 2,080 to Rs 2,150 per share.
4. With this issue raised, the company aims to grow and strengthen the Paytm ecosystem, including acquisition and retention of consumers and merchants and giving them greater access to technology and financial services (Rs 4,300 crore). The company aims to invest in new business initiatives, acquisitions and strategic partnerships (Rs 2,000 crore) among other general corporate objectives.
5. The company has fixed the minimum bid lot size at 6 equity shares and thereafter in multiples of 6 shares. Retail investors can invest a minimum of Rs 12,900 for one lot and their maximum investment for 15 lots will be Rs 1,93,500.

Paytm is a leader in India’s digital ecosystem, the largest payments platform for consumers and merchants. Its total merchant base has grown from 11.2 million as on March 31, 2019 to 21.1 million as on March 31, 2021.

Its GMV has increased from Rs 2,292 billion in FY19 to Rs 4,033 billion in FY21. It provides consumers and merchants easy and inclusive access to technology-led, easy-to-use digital products and services as well as financial services. As of June 30, 2021, it provides payment services, commerce and cloud services and financial services. Is. As per DRHP 337 crore consumers and over 2.2 crore traders. Coming to the leadership, Vijay Shekhar Sharma is the Managing Director and Chief Executive Officer of the company and Chairman of the Board. Douglas Fagin is a non-executive director (nominee of ANTFIN (Netherlands) Holding BV).

Here’s a look at the sources of revenue for the company:

1. Payment Services: Paytm transaction fee also known as merchant fee is based on a percentage of the Gross Merchant Value (GMV). It also earns through consumer, convenience and subscription fee
2. Financial Services: It charges based on the services received by the customer. It charges fees on marketing and distribution of credit cards, commissions on insurance policies, fees from the lending business
3. Commerce Services: It charges convenience fee from consumers and collects transaction fee from merchants on tickets for entertainment, travel and other such services.
4. Cloud Services: Paytm charges a subscription fee which can be fixed or variable depending on the volume on the platform

Let us take a look at the company’s financials and some key ratios (Source: DRHP and ICICI Direct Research)

ICICI Direct said that the company competes in markets characterized by intense competition, changing technology, changing merchant and consumer needs, evolving industry standards and constant introduction of new products and services. There are fewer barriers to entry within the industry and the cost of switching between offerings is lower.

The company derives the majority of its revenue from the transaction fees it collects from merchants for their payment services. For example, in FY19, FY20, FY21 and Q1FY22, revenue from payments and financial services accounted for 52.5%, 58.1%, 75.3%, 78.0% and 77.4% of its revenue from 46 operations, respectively.

The brokerage also noted that Paytm had negative cash flow from operating activities for FY19, FY20 and FY21.

KR Choksi Research notes that Paytm comes under the purview of RBI, SEBI and IRDA. Any unfavorable move out of the three could act as a hindrance to revenue growth and materially affect the valuation, it says.

Well-known valuation guru Aswath Damodaran wrote in his blog post, “Even if you strongly support the company and find it undervalued, it is up to you to focus your portfolio around this stock. In other words, it is the type of stock in which you would invest 5 per cent or maybe 10 per cent of your portfolio, not 25 per cent or 40 per cent.”

In its research report till November 3, KR Choksi has recommended the IPO to be ‘subscribed’ while ICICI Direct has given it an ‘unrated’ rating.