Exclusive: Paytm IPO size may still go up by at least Rs 1,000 crore

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Bengaluru | Mumbai: Paytm’s 16,600-crore initial public offering (IPO), billed as one of the biggest in India, is expected to increase the offer size by around Rs 1,000-2,000 crore, people briefed on the matter said. This will largely be through a secondary share sale — technically known as an offer for sale — where existing investors will sell shares.
The development comes at a time when Paytm’s parent One97 Communications — which houses Paytm and its fintech offshoots — is expected to receive an approval from the capital markets regulator, the Securities and Exchange Board of India, over the next few days.

Paytm may also increase the primary component through a fresh issuance of shares, the sources added. “The move to increase the offer size has come
after receiving the Sebi comments which are minor in nature. Owing to high interest in startup IPOs, the company has taken the call to increase offer size,” one of the people briefed on the matter said.

“They (Paytm) are aiming to list by the second week of November,” the person said.
“They (Paytm) have decided to increase the offer size by at least Rs 1,000 crore, but talks are on to increase it further and the IPO could (now) be around Rs 18,000 crore,” a person familiar with its plans said.

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In its draft red herring prospectus (DRHP), Paytm had said it would look to raise Rs 16,600 crore, equally split between a fresh issuance of shares and a secondary sale. In a secondary sale, existing investors sell stakes, and the money does not flow into the company’s coffers.
The DRHP listed founder Vijay Shekhar Sharma, Japan’s SoftBank Group, Ant Group and Elevation Capital as selling shareholders, all of whom would trim a part of their holdings in the OFS.

A spokesperson for Paytm declined to comment on the increase in its IPO size.

Given Paytm’s size and its standing in the country’s fintech segment, the IPO is expected to be a significant event for the startup ecosystem in India, coming as it does after food delivery app
Zomato’s over Rs-9,000 crore listing in July.

According to Paytm’s DRHP, 75% of its public issue will be earmarked for qualified institutional buyers (QIBs), while 15% is for non-institutional investors and the balance is for retail investors. Up to 60% of the QIB portion may be allotted to anchor investors.

ET reported earlier this month that Paytm’s IPO
had garnered interest from the likes of Canada’s CPPIB, US-based asset manager Alkeon Capital as well as funds managed by Morgan Stanley and Goldman Sachs. The new investors join a list of bidders that are in talks to invest in Paytm’s anchor investment as well as its IPO. The firm is unlikely to raise funds in a pre-IPO placement, news wire Bloomberg
reported on Thursday.

According to sources, Paytm is seeking a valuation of $20-$22 billion in the IPO. The company was valued at around $16 billion when it last raised funds two years ago.

“Some global investors have shown interest at a higher valuation, but the company has indicated to investors it can settle anywhere between $20 billion and $22 billion,” a person aware of the discussions said. Other sources said the response to its IPO issue has so far been muted, giving it a lower valuation.

Sebi’s approval for the Paytm IPO comes at a time when many new-age internet firms have either listed on the exchanges or have initiated proceedings to do so. Indian-origin SaaS startup Freshworks Inc.
chose to make its public market debut on the Nasdaq, while
Nykaa will launch its IPO on October 28. IPOs of PolicyBazaar, MobiKwik, Pine Labs and Delhivery, among several others, are in the pipeline.

Paytm plans to utilise most of the proceeds from the IPO to strengthen its businesses across verticals such as credit, insurance, and e-commerce, as well as to acquire more merchants and retain customers, it said in its DRHP.

The company posted a consolidated loss of Rs 1,701 crore on revenue of Rs 2,802.4 crore in FY21, and a loss of Rs 2,942.4 crore on revenue of Rs 3,280.8 crore in FY20, according to its DRHP.

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