Paytm's DRHP: User numbers to GMV growth, here're 10 things you can't miss

One97 Communications, the parent firm of Paytm, filed its Draft Red Herring Prospectus (DRHP) on July 16 with the market regulator Securities and Exchange Board of India (Sebi), for an aggregate offer size of Rs 16,600 crore through an initial public offering (IPO).

The company’s market debut is touted to be the biggest-ever in India, where it will raise Rs 8,300 crore through fresh issue of shares and Rs 8,300 crore through an offer for sale (OFS). Paytm’s existing shareholders including Vijay Shekhar Sharma will be selling their shares in the IPO.

Here are the ten things you cannot miss from Paytm’s DRHP

1. User numbers: According to RedSeer, the company has the largest payments platform in India with a gross merchant value of Rs 4,033 billion in FY21. With 333 million consumers and 21 million merchants, Paytm has the largest payments merchant and consumer base in India, according to RedSeer, which lets the company leverage the power of both the consumer and merchant side on the payment network, and which the company believes will be a major driver of its digital lending products. 

Paytm's Payment Gateway is the largest payment gateway aggregator in the county based on total transactions, for the financial year ended March 31, 2021, with the widest ecosystem of payment instruments.

2. Paytm’s GMV growth: The DRHP shows Paytm’s GMV growth over the last years. In Q4FY21, the company recorded Rs 1,469 billion in GMV, which is a 100 per cent growth over the same period in the previous year. 

3. Paytm is contribution margin positive: While the company in its risk factors has stated its ability to turn profitable as a risk, the company’s numbers show that it’s already contribution margin positive. “Our contribution profit improved from a loss of Rs 19,980 million in FY19 to a profit of Rs 3,625 million in FY21. Our contribution margin increased from a loss of 61.8 per cent in FY19 to a profit of 12.9 per cent in FY21,” the company said in its DRHP.

4. Losses reducing on a year-on-year basis: Paytm has revenue of Rs 3,186 crore, much higher than its competitors, and has also been cutting down its losses. In FY21, the company cut its losses by 42 per cent on a year-on-year (Y-o-Y) basis, which is a continuation of a trend that had set in since FY19. In FY19, Paytm reported losses of Rs 4,230 crore, in FY20, the company brought it down to Rs 2,942 crore and in FY21, brought it down even further to Rs 1,701 crore.    

5. Marketing costs are down: Paytm does not rely on cashbacks and incentive-driven growth and that is noted by the company’s reports on its marketing and promotional spending. In FY19, Paytm recorded losses of Rs 34,083 million, in FY20, the company reduced it to Rs 13,971 million and in FY21, it saw a massive reduction to Rs 5,325 million.

6. Paytm’s lending business is growing: The company’s lending business, merchant loans, and Paytm’s Buy Now, Pay Later product Paytm Postpaid is growing well. The company also recently launched an extension of the same with Paytm Postpaid Mini. The company’s DRHP shows that it has disbursed 1.4 million loans in Q4FY21, almost 53 times higher than the number of loans (26,000) disbursed during the same period the previous year.

7. Paytm Money has a strong foothold: The company’s bet in the wealth management space Paytm Money has built a holding for itself. Paytm’s DRHP said, “We have achieved a combined AUM (assets under management) of Rs 52 billion in mutual funds, gold and stock broking, as of March 31, 2021.”

8. Paytm has multiple payment instruments: Paytm has built a strong base in India with multiple payment instruments. These instruments include prepaid payment instruments such as Paytm Wallet, sub wallets and prepaid card; Savings account, current account, debit cards, FASTag, National Common Mobility Card, and Unified Payments Interface (UPI) handle, which are issued or opened by Paytm Payments Bank, and Paytm Postpaid, equated monthly instalment, credit cards, amongst others, issued by our financial partners. The company has listed the same in its competitive strengths, as it said, “Our payments platform, with a wide selection of daily life use cases and payment instruments, provides us with large scale and reach.”

9. Paytm’s dominance in merchant transactions: Paytm continues to have market leadership by transaction volume. As per the company’s DRHP, in consumer to merchant transactions Paytm has a 40 per cent market share, whereas in consumer to merchant wallet transactions, Paytm has a 65-70 per cent market share.

10. Growing talent at Paytm: The company is investing in its employees. Paytm in its DRHP said that over FY21, it had an average of 8,623 on-roll employees worldwide. The company also places a strong focus on technology growth as it said, “We had an average of 2,550 member engineering, product and technology team in FY21.” It also hired senior President - Compliances and Operations Deepankar Sanwalka from PwC where he was Advisory Leader for India and a member of the PwC India Leadership Team, Global and Asia Pacific Americas (APA) Advisory leadership teams.