Paytm operator One 97 Communications had a moderate listing on the bourses on November 18 as it fell 9 percent on debut. The stock opened at Rs 1,950 on the National Stock Exchange and the listing price on the BSE was Rs 1,955, against issue price of Rs 2,150.
The leading digital payments platform's initial public offering saw a tepid response from investors as it was subscribed 1.89 times. Net net qualified institutional investors supported the issue during November 8-10, subscribing for shares 2.79 times the portion set aside for them.
Retail investors also aided the offer to some extent by bidding for shares 1.66 times the reserved portion but non-institutional investors had put in bids for only 24 percent of the reserved portion.
Paytm launched the largest public issue in India, raising Rs 18,300 crore that comprised a fresh issue of Rs 8,300 crore and an offer for sale of Rs 10,000 crore by several shareholders, including the founder and investors. The net proceeds from fresh issuance will be utilised for strengthening the Paytm ecosystem, and investing in new business initiatives, acquisitions and strategic partnerships.
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One 97 Communications, India's leading digital ecosystem for consumers and merchants, reported a consolidated loss of Rs 1,701 crore for the year ended March 2021, against the loss of Rs 2,942.4 crore in FY20, and a loss of Rs 4,230.9 crore in FY19. Total income during the year FY21 declined to Rs 3,186.8 crore, from Rs 3,540.7 crore in FY20 and Rs 3,579.7 crore in FY19.
On a quarterly basis, the consolidated loss in Q1FY22 widened to Rs 381.9 crore, from a loss of Rs 284.4 crore in the corresponding period last fiscal. However, revenue increased sharply to Rs 948 crore from Rs 649.4 crore over the same quarters.
The company launched Paytm in 2009 and has built the largest payments platform in India based on the number of consumers, number of merchants, number of transactions and revenue as of March 2021. Its ecosystem served 33.7 crore registered consumers and 2.18 crore registered merchants as of June 2021.
According to RedSeer, it is the largest payments platform in India with a GMV of Rs 4,03,300 crore in FY21. It has an overall mobile payments transaction volume market share of approximately 40 percent, and wallet payments transaction market share of 65-70 percent in India as of FY21.
All analysts had given a thumbs up to the IPO given the expected strong growth in mobile payments, and substantial growth in user base and gross merchandise value (GMV) since its inception within the Fintech sector.
"At the upper end of the price band, Paytm is valued at 49.7x its FY21 revenues. While valuations may appear to be expensive, Paytm has become synonymous with digital payments through mobile and is the market leader in the mobile payment space. Patym is well positioned to benefit from the exponential 5x growth in mobile payments between FY2021 – FY2026 and hence believe that the valuations are justified. We recommend investors to subscribe to the issue," says Angel One.
Canara Bank Securities also recommended a subscription for long term to the issue. "The company exhibits substantial growth in user base and GMV since its inception within the Fintech sector. Moreover, the business is scalable due to the high convenience of digital banking. However, the issue is available at P/B (price-to-book value) of 49.74x for FY21 which is expensive," it reasoned.
Research house Macquarie has initiated with an underperform rating on One 97 Communications as it believes PayTM’s business model lacks focus and direction.
It has kept a target price of Rs 1,200.
Competition and regulation will drive down unit economics and/or growth prospects in the medium term and unless PayTM lends, it can’t make significant money by merely being a distributor, said research house.
The key game changer could be an ability to monetise UPI, which could completely swing the investment case, it added.Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.