PayTm Files for IPO, Here’s What You Need To Know

Seems like another IPO session is underway and this time, it’s huge. With an enviable lineup of startups ranging from Zomato to Nykaa, PayTm is leading the way with India’s largest IPO. We covered the PayTm IPO in an earlier installation. However, One97 Communications, PayTm’s parent company has recently filed a DRHP with SEBI to go through with the IPO, thus making the matter more immediate and official. So, let’s look at the details of India’s largest IPO.

Paytm IPO: Company Overview

One97 Communication launched PayTm in 2009 as one of the earliest mobile digital payments platforms in India. What started off as a platform that enables bill payments and mobile top-ups only, soon tapped into the ever-growing digital population of India and an increasingly rising demand for digital payments that came with it. As of 31st March 2021 PayTm provides payment services, commerce and cloud services, and financial services to over 33 Crore customers across India with more than 2 Crore merchants on the company’s books.

One of the reasons why PayTm succeeded can be owed to the company’s integration of consumers and merchants on the same platform to create an ecosystem that fosters commerce and in turn access to fiscal services. Paytm has created what some refer to as a super app that offers the user a multitude of services and products ranging from Paytm payment applications, digital wallets, savings accounts, buy-now-pay-later facilities, and even integration with credit card and e-banking firms to allow for those services as well.

Paytm IPO: Market Strength

The company undoubtedly has one of the strongest market presence as evidenced by a cover on the issue by TechCrunch which reports that Paytm processed 1.2 billion transactions for the month of February alone, thus demonstrating its strong market share in one of the world’s fastest-growing digital payments market competing with Google Pay, Amazon Pay, Phone Pe, to name a few.

We are humbled by the trust India has shown in us & made Paytm their preferred digital payments & financial service provider. We have consistently maintained industry-leading market share & growing at an impressive rate.

– Narendra Yadav, Paytm Vice President

Apart from having the first-mover advantage in the market, Paytm also derives a lot of tangible benefit from the fact that its ecosystem allows for addressing large market opportunities with scale and thus giving the company more than one growth vector.

The company has also developed goodwill through its directives on Trust, Convenience, and Transparency. Paytm also prides and excels at building technology and innovating through a multitude of technology layers with stable releases and products that actually meet the market fit.

In addition to these strong suites, Paytm also aims to achieve its goal of growing its customer and business base and onboard half a billion Indians into the economy by expanding and enhancing Paytm’s offerings. The company is actively working to expand its a network across low-tier cities thereby opening up to merchants who might not have had the option to go for digital payments even some years ago. Leveraging this network effect, the company also aims to spread the dominance of Paytm Payments Bank as demonstrated by its increasing popularity and earnings.

Paytm IPO: Financials

Understanding the fundamentals of a company is important before you invest in it, however, one of the most overlooked aspects of investing, mainly because it is not so intuitive is the technical analysis. So, lets dig into that and understand how Paytm makes and spends its bucks.

One97 communications posted a consolidated loss of Rs 1,701 Cr with a revenue posting of Rs 2,801.3 Cr for FY21 and loss of Rs 2,942.4 Cr on a revenue posting of Rs 3,280.8 Cr for FY20. the company’s two major revenue streams are payment and financial services and commerce and cloud services with INR 28,024 Millions and INR 21,092 Millions respectively. All of this is substantiated with an EBIDTA (adjusted) of Rs 16,548.

Verdict

So, is this stock good for the long term or not? Will it net you quick returns? Well one cannot predict such outcomes at this stage. Although Paytm has a strong market presence and a product which works. However, looking at its recent troubles with staying on the Google’s app distribution platform might give the investor a reason to worry about. Digital payment without a doubt is not going anywhere. But the market competition is intense and at any moment bigger players to the likes of Google and Amazon may apply expansionist policies which might affect Paytm’s market share. In the end, it’s a matter of market relevance and Paytm has managed that since 2009, in the aftermath of the subprime mortgage crisis. But only time will tell us what the outcome shall come to be.