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We have priced the IPO rationally, says Paytm chief

Our Bureau New Delhi | Updated on October 28, 2021

Vijay Shekhar Sharma, CMD & CEO, One97 Communications

Chose the bottom price band range among different valuation choices to enable as many investors as possible.

The upcoming ₹ 18,300 crore public float of One 97 Communications (Paytm) has been priced “rationally”, leaving room for more people to participate and more investors to gain from the offering, its Founder and Managing Director & CEO Vijay Shekhar Sharma said on Thursday.

The price band for Paytm’s IPO — the largest ever public offering in India — has been set at ₹2,080-2,150 per share, valuing Paytm at $19.3 billion to $19.9 billion. The IPO opens on November 8 and closes on November 10, with the anchor tranche up to ₹8,235 crore to open and close on November 3.

“We are already seeing tremendous excitement among investors for the IPO. For valuation, we chose the bottom range of choices made available to us purely because we want as many people to participate and as many to make money”, Sharma said at a press conference to announce the details of the proposed public offering.

“Considering the huge demand ahead of us, we don’t need or have to hike the price ( for IPO) just because everybody is ready to give it (higher price) to us. We have kept it rationally and put it on a lower level on the different valuation choices we had on the table. It was a humbling experience”.

Read also: Paytm IPO: The ₹18,300-cr public issue opens on Nov 8

Value creation for investors

Madhur Deora, President and Group CFO, Paytm, said that the valuation, which has been pegged at $19.5-20 billion, could have been done at a higher valuation, but “we don’t believe in getting every last dollar of valuation”.

“We want to have really high-quality investors and want to make sure that we create value for the investors that are coming in. Ultimately We believe that this price band is the right price band to go with”, Deora said.

Sharma said that the company had always opted for a lower range of price level whenever it had raised money in the past, although it had opportunity to raise money at higher pricing. “We could have always raised more money from the same set of investors at a higher price. But I have always believed that tons of people should make money when they invest and be comfortable with that. We always chose lower side of price band. That always has worked well for us”, Sharma said.

On pre-IPO placement

On why Paytm opted not to do pre-IPO placement, Sharma said that the company thought it would “fair and equitable” to have all shares in the IPO offered to all investors as opposed to taking out a chunk of it and making it available to only a few of them in a pre -IPO process. Moreover, the timelines issues were there, and pre-IPO was a separate process, he added.

Read more: Paytm may shelve ₹2,000-crore pre-IPO placement

Paytm is India’s largest payments company by consumers, merchants, transactions and revenue, catering to 337 million individual customers and 21.8 million merchants.

Sharma said that Paytm sees technology as a force multiplier that can bring formal financial services to the masses of India. “We see this as an executable mission in few years forward”, he added.

Financials

For the first three months of this fiscal year, Paytm’s revenues were up 46 per cent to ₹ 948 crore as against ₹ 649 crore in the same quarter last fiscal year. Paytm’s losses stood at ₹ 381.9 crore for the three months ended June 2021.

Paytm’s bet on financial services has taken off with payment and financial services contributing almost 80 per cent of the company’s revenues.

Asked if Paytm would go in for acquisitions for growth, Sharma said that he would prefer build over buy even as he said that there was nothing “bright enough” for it to buy at the moment. “That said never say never. We will be conservative about it and only when it adds new market and new capability will we look at buying anything. We are not going to do the consolidation of the new business that we are in”, he said.

Sharma also said that Paytm would not need any additional funds beyond the proposed IPO capital raise. “Unless extraordinary circumstances present themselves, there is no reason for us. We expect the internal accrual from various businesses to take care of our requirement”, he said.

Asked when Paytm would reach profitability at the bottomline level, Deora said that it would not be possible in the current setting to give “forward looking” numbers, but one of the things investors look at is the ₹245 crore contribution profit made in the last quarter. “As revenue grows (60 per cent growth last quarter) can you increase your contribution money more and more and what point can it pay for your rest of the cost. What you will see is our EBIDTA burn has come down”, he said.

On NBFC licence

Meanwhile, Sharma also said that Paytm is not going to apply for an NBFC licence. “ We already have a scalable business in partnership with banks and financial services players where we help them acquire customers and serve them in much better way than they would have on their own physical space or platform. It’s a scalable business, a sizeable business and not a good business to get into NBFC licence”, Sharma said.

Sharma also said that Paytm does not plan to invest additional capital or capital in Japan. “Why invest anywhere when India is hot and a happening market. Wishfully we will do a good job of dominating in India on payment and financial services and then over long term look at rest of the world”, Sharma said.

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Published on October 28, 2021

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