Paytm IPO: Paytm recordsdata for largest Indian IPO in no less than a decade

Mumbai | Bangalore: Paytm has filed a draft prospectus with the capital markets regulator to boost Rs 16,600 crore ($2.2 billion) in its largest Indian preliminary public providing (IPO) in no less than a decade.

The Noida-based fintech agency instructed the Securities and Trade Board of India that the Paytm IPO will include the same Rs 8,300 crore ($1.1 billion) in addition to a secondary concern or provide on the market of the identical dimension. SEBI).

ET has reviewed the draft Purple-Herring Prospectus (DRHP).

Paytm may additionally take into account a pre-IPO funding spherical of as much as Rs 2,000 crore and if this occurs the scale of the brand new concern shall be adjusted accordingly, the submitting mentioned. The corporate didn’t disclose the valuation sought in its IPO, nonetheless, knowledgeable sources instructed ET that the corporate is concentrating on a valuation within the band of $24-30 billion.

Based by Vijay Shekhar Sharma, Paytm is at the moment the second most beneficial Indian startup with $16 billion.

As reported by ET in its Friday version, Paytm traders, most notably Ant Group, are anticipated to cut back their stake within the firm by way of OFS within the public providing. The OFS part within the IPO shall be Rs 8,300 crore. Aside from the Chinese language fintech large, which has over 30% stake in Paytm, others anticipated to promote stake embody Alibaba, SoftBank, Elevation Capital in addition to Paytm founder Sharma.

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Paytm ShareholdingETtech

(Graphic: Rahul Awasthi/ETTech)

diwali opening

Paytm’s IPO, which is prone to open round Diwali this 12 months, would be the largest amongst Indian inventory exchanges in greenback phrases after Coal India in 2010 (~$3.3 billion) and Reliance Energy in 2008 (~$2.4 billion).

Top 5 IPOs in IndiaETtech

75% of Paytm’s public concern shall be reserved for Certified Institutional Patrons (QIBs), whereas 15% shall be reserved for non-institutional traders (NIIs) and the remaining 10% for retail traders. As much as 60% of the QIB share could be allotted to anchor traders. In line with DRHP, traders can have a lock-in interval of 1 12 months earlier than promoting their shares within the pre-IPO spherical.

In its draft submitting, Paytm mentioned that it’s at the moment a “foreign-owned and managed” firm and can stay so post-IPO as per the consolidated FDI coverage and international trade rules and “we shall be topic to Indian international funding accordingly.” regulation “.

Paytm listed all of its main shareholders talked about above as entities having a “important affect” on the corporate. Sharma’s brother Ajay Shekhar Sharma can be listed as a ‘relative of individuals within the voting energy of a gaggle exercising management or important affect’. Even earlier than the Chinese language authorities foiled Ant’s IPO plans final 12 months, Paytm was talked about in Ant’s draft prospectus as one of many firms the place the Chinese language fintech main had affect.

On Friday, ET reported that Ant Group is prone to cut back its stake in Paytm to 25% or much less from its present holding of 30.33% in parent-one97 Communications, the dad or mum of the fintech main, earlier than the latter’s launch on Indian exchanges. . It’s because in keeping with ET sources, Paytm desires to deliver down Ant’s stake beneath 25% to adjust to SEBI’s norms of itemizing as a ‘skilled managed firm’.

Ratan Tata, who holds round 75,000 Paytm shares by way of RNT Associates, is planning to promote a few of them. DRHP mentioned Warren Buffett’s Berkshire Hathaway Holdings, which holds 17 million Paytm shares, will promote a small portion — about 1,200 shares — within the IPO.

Learn additionally:
Purple herring, crimson flags: High 10 takeaways from Paytm’s draft IPO submitting

capital use, losses

From the proceeds of the IPO, Paytm mentioned it intends to make use of Rs 4,300 crore to develop and strengthen its ecosystem by giving them better entry to know-how and monetary providers by way of “acquisition and retention of shoppers and retailers”. planning. It’s going to make investments as much as Rs 2,000 crore for brand spanking new enterprise initiatives, acquisitions and strategic partnerships. The remainder of it will likely be for common company functions.

The SoftBank- and Alibaba-backed firm mentioned it could proceed making losses within the close to future. “As the marketplace for our platform, services continues to evolve, it’s tough for us to foretell the outcomes of future operations or the extent of our market alternatives,” it mentioned in its draft IPO submitting.

Paytm is anticipating a rise in its working bills because it plans to rent further personnel and develop operations and infrastructure in India and overseas. In FY20 and FY21, it reported losses of Rs 2,943 crore and Rs 1,704 crore respectively.

The corporate reported flat consolidated income for the second 12 months in a row in fiscal 2010, because it lower spending on reductions, cashback and promotions, which helped cut back losses by 30%, however hit income development. Advertising and marketing and promotional bills declined 61% to Rs 532 crore throughout FY11 from Rs 1,397 crore a 12 months in the past. The whole expenditure in FY20 declined to round Rs 4,783 crore from Rs 6,138 crore.

Paytm’s DRHP additionally disclosed sure regulatory warnings the corporate has obtained from establishments equivalent to SEBI, RBI and IRDAI. Firstly, SEBI has noticed ‘sure violations’ of legal guidelines and rules by Paytm Cash on importing KYC information of consumers and offering funding recommendation. Paytm Cash submitted its reply final July after the market regulator issued a written warning to Paytm Cash to take corrective steps, Paytm mentioned. The agency additionally suspended its advisory enterprise on March 31, 2021, after the brand new advisory tips had been notified by SEBI in February.

Then, as a foreign-owned firm, Paytm purchased a 100% stake in its insurance coverage broking subsidiary between November of 2019 and February of 2020, when the federal government requested international firms to extend their stake in insurance coverage intermediaries from 49% to 100%. % can. Nonetheless, the deal was cleared by RBI below the Overseas Trade Administration Act (FEMA), which was up to date to incorporate the brand new FDI restrict solely in April 2020. Paytm then sought post-facto approval from the federal government, which continues to be being processed and topic. For incremental checks.

As reported by ET in June, Paytm has additionally proposed to lend round Rs 492 crore within the type of Optionally Convertible Debentures (OCDs) to VSS Holdings Pvt Ltd, which is 100% owned by Sharma . The submitting mentioned that the funds, if used, can be used for the aim of investing in Paytm Insurtech, which might use it to buy Raheja QBE Basic Insurance coverage.

Final 12 months, Paytm had introduced that it could purchase Raheja QBE in a deal value Rs 568 crore, however it’s but to shut. “Our firm can have the choice to transform these OCDs into fairness shares (topic to regulatory approval) of VSS Holdco.” At current, there is no such thing as a certainty that this transaction will proceed, Paytm mentioned in DRHP.

crimson flag

Paytm in its DRHP submitting additionally confirmed that it has utilized to the RBI for a New Umbrella Unit (NUE) license to arrange a brand new retail funds physique. This shall be carried out by way of a gaggle subsidiary, Foster Funds Community Ltd., together with 9 different consortium companions.

Nonetheless, a rule launched by the RBI in June 2021 bars any investor from holding greater than 20% voting rights in a cost system operator (PSO) in a rustic that doesn’t adjust to Monetary Motion Process Pressure (FATF) guidelines. does. Paytm mentioned this rule might act as a barrier to future investments in NUE. FAFT is the worldwide cash laundering and terrorist financing watchdog. Nations that don’t adjust to its guidelines embody Mauritius, Uganda and the Cayman Islands.

Paytm’s liabilities, which aren’t structured as a mortgage association, stand at Rs 47.6 crore as of March 31. The startup additionally has an unresolved revenue tax case value Rs 1.6 crore.

Moreover, there are 25 unsolved legal proceedings and 40 tax lawsuits towards Paytm, its subsidiaries and administrators, the DRHP disclosed.

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