Paytm IPO opens: Check latest GMP, brokerages’ views and other key details

The much-awaited initial public offering (IPO) of One 97 Communications, the parent company of Paytm, opened for public subscription on Monday. The public offer will close on November 10. The IPO was subscribed 4 per cent on the first day of offer till 10.30 am. The issue received bids for 20,70,258 shares against 4,83,89,422 shares offered by the company.

Here are the key things to know about Paytm IPO:

The issue: The public offer is a combination of fresh and offer for sale (OFS). Paytm will not receive any proceeds from the OFS part of the issue. Of the net proceeds from the fresh issue, Rs 4,300 crore will be used for growing and strengthening the Paytm ecosystem, including the acquisition and retention of consumers and merchants. The company will also utilise Rs 2,000 crore for investing in new business initiatives, acquisitions and strategic partnerships. Residual funds will be used for general corporate purposes.

Price band: Paytm has fixed a price band of Rs 2,080-2,150 per share for the ongoing public offer. The company aims to raise Rs 18,300 crore through the initial share sale. One 97 Communications IPO is the biggest primary issue in the country since Coal India Ltd’s share sale in 2010. Retail investors can bid for a minimum of one lot of six shares up to a maximum of 15 lots. At the upper price band one lot of Paytm shares will cost Rs 12,900.

Grey market premium: Abhay Doshi, founder, Unlisted Arena told BusinessToday.In that Paytm shares were trading at a premium of Rs 60 in the unlisted market in the morning trade on Monday.

Stretched valuations: There is a large section of the population who are underserved in payments and financial services products. Also, there is a vast population of small businesses, which have not witnessed the benefits of digital commerce. Thus, the company has a large addressable market to serve. However, Choice Broking said that at a higher price band of Rs 2,150, it is demanding an EV/sales multiple of 46.1 times, which seems to be stretched. The demanded valuation is also at a significant premium to China’s Ant Group proposed IPO in 2020. “Considering the growth potential and stretched valuations, we assign ‘Subscribe for Long Term’ rating for the issue,” Choice Broking said.

Arihant Capital Markets also advised investors to subscribe to the issue for listing gains. However, it also believes that the valuation of Paytm IPO is on the higher side.

Key risks: Arihant Capital Markets in its report highlighted that One 97 Communications has a history of net losses and may not be able to achieve profitability. The company had experienced negative cash flows in prior years. “If the payment processing charges payable to financial institutions and card networks increase significantly. They aren’t able to pass on these higher processing charges to merchants or consumers. So, they may incur losses,” the brokerage said.

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