Paytm’s Rs 18,300 Crore IPO Opens For Subscription. Should You Invest?

Paytm IPO: Brokerage form Anand Rathi has a subcribe rating from a long term perspective.

Paytm’s Rs 18,300 crore initial public offering (IPO), the country’s biggest-ever, opened for subscription on Monday, November 8. The company is selling shares in the price band of Rs 2,080-2,150 per share and 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.

Paytm’s IPO consists of an offer for sale of Rs 10,000 crore from its existing investors and fresh issue of Rs 8,300 crore. Paytm allocated shares worth rs 8,235 crore to more than 100 institutional investors, including the government of Singapore, ahead of the country’s largest stock market listing.

The company will use proceeds from IPO to grow and strengthen Paytm ecosystem, including through acquisition and retention of consumers and merchants and providing them with greater access to technology and financial services, invest in new business initiatives, acquisitions and strategic partnerships and general corporate purposes.

Paytm IPO: Should You Invest?

Brokerage form Anand Rathi has a “Subcribe” rating on the IPO from a long term perspective. The Mumbai-based brokerage in a note to its clients said, “given that the company’s ecosystem allows it to address large market opportunities, scale and reach, product, technology and leadership – We give this IPO a “Subscribe (Long-Term)” rating.

“At the upper end of the IPO price band, Paytm is being offered at price-to-book values of 9.5 times with a market capitalization of Rs 1.39 lakh crore. The company benefits from both customer side and merchant side by providing payment and other services through Paytm app, the company further aims to expand its reach and benefit from scale which is challenging for other players,” Anand Rathi added.

Brokerage firm Nirmal Bang has a neutral rating on the IPO and said, “At 49.7 times FY21 revenue, we are not comfortable subscribing to the issue owing to heightened competition, sub-par revenue growth and uncertain profitability metrics.”

“With many large global investors and tech companies having taken stakes or bought out entire companies, we expect competition to heat up, especially in the merchant payment solutions. Although this would lead to faster penetration of the addressable merchant market of 80 million accounts and grow industry revenues, it could well limit the addressable profit pool in the longer run. Also in case of Paytm, the consolidated revenue growth has lagged unlisted peers owing to de-focus on commerce and consumer payments verticals which would continue to be a drag in the near term until the verticals of merchant payments and financial services become sizable,” Nirmal Bang added.

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