Paytm pegs IPO at $20 bn valuation, Vijay Sharma says life to become QSQT

Paytm will be the most valued unicorn in the country at around $20 billion (Rs 1.48 trillion) when it launches its initial public offering on November 8. The fintech major, which was last valued at $16 billion two years ago, is seeking to raise Rs 18,300 crore in India’s largest IPO.

With this, Paytm would cross edtech player Byju’s estimated $18-billion valuation earlier this month. At the pre-IPO presentation, bankers confirmed that the enterprise value of Paytm would be in the range of $19.3 billion to $19.9 billion as the price band is set at Rs 2,080 to Rs 2,150 per share. While Walmart-owned Flipkart, valued over $35 billion, would top the valuation list, it’s now counted as a former unicorn.   

Vijay Shekhar Sharma, managing director and CEO of One97 Communications (parent company of Paytm), cited high demand from investors to explain why the IPO size had been raised to Rs 18,300 crore from the earlier Rs 16,600 crore.

While addressing the media ahead of entering a new phase, Sharma referred to QSQT--a term used by India Inc on and off to describe the life and responsibilities of a listed entity. ‘’Our life is going to become QSQT now or quarter se quarter tak (from one quarter to next)," said Sharma.

The Paytm founder said, "we have been getting personal messages from investors requesting for an allocation in the Paytm IPO. These people have never invested before in a listed company in India.’’ Pointing out that there’s no interesting acquisition target on the horizon, he said, "but never say never".

According to the company’s red herring prospectus, Paytm’s total user base has increased to 337 million registered consumers and over 21.8 million merchants as of June 30.

Paytm’s losses for the quarter ended June stood at Rs 381 crore, up from Rs 284 crore in the same period last financial year. Its annual losses during FY21 were at Rs 1,596 crore, lower than Rs 2,598 crore in FY20. The company’s contribution margin rose to 27.4 per cent in Q1FY22, up from 14.9 per cent a year ago.

“I don't think we need to go out and set a specific timeline for that (profitability). The important thing to note is that we are heading in that direction as our costs are reducing and contributions are increasing. We have not set a specific timeline also because India is a growth market and there is no reason why we should not invest even more,” Sharma told Business Standard in an interaction.

Paytm plans to have "100 per cent flexible" working for its employees "for good", according to Sharma.  This has also helped Paytm recruit from smaller towns and cities. The company employs 11,500 employees, according to June data.

Roughly half of the offer for sale (OFS) in Paytm’s IPO, which recently got approval from the Securities and Exchange Board of India (Sebi), will be done by Chinese investor Ant Financial. The OFS size has now inched up to Rs 10,000 crore, in which Ant Financial is offloading shares worth Rs 4,704 crore, Sharma worth Rs 402.6 crore and Japan's Softbank around Rs 1,689 crore among others.

The group has Paytm Mall as a separate business and the parent company is not investing any more in it. The company said that its payments and financial services vertical makes up for almost 80 per cent of its revenue.