Paytm shares soar over 80% in grey market on hopes of a killing in IPO

The Ant Group-backed firm has got in-principle nod from its board to raise Rs 22,000 cr; IPO is expected to hit the market before end of calendar year

Shares of digital payments company Paytm have soared more than 80 per cent in the grey market, said people who deal in shares of unlisted companies. The gain is on optimism that the stock price will be valued at least 40 per cent higher than the current levels when the company goes public later this year, they said.

“The stock has run up from Rs 12,500 per share a month ago to Rs 22,000. Traders are hoping that the stock will be valued at Rs 35,000 per share in the IPO. The company will go for a bonus issue to bring down the denomination,” said Dinesh Gupta, director of Unlisted Zone, a firm that facilitates buying and selling of unlisted company shares.

The Ant Group-backed company has obtained an in-principle approval from its board to raise around Rs 22,000 crore through an IPO. The maiden offering is expected to hit the market before the end of the calendar year.

If the IPO goes through, it will be the biggest-ever maiden offering in the country. According to reports, Paytm is looking at valuations in excess of Rs 2 trillion in its IPO.

Market players said the current grey market price is pegging the valuations at around Rs 1.5 trillion.

In November 2019, the company had raised $1 billion at a valuation of Rs 1.1 trillion. Paytm has emerged as one of the largest digital payments players in the country. It rank’s third on the UPI payments with a market share of around 12 per cent.

In March, Paytm achieved over 1.4 billion transactions. This growth was driven by offline and financial services, said the company. The firm said it continues to register, on average, 15 per cent month-on-month growth. In February, Paytm had touched the 1.2 billion transactions mark, making the March numbers see a nearly 17 per cent increase.

Paytm in the recent time has been focused on increasing its reach in the market and work on its topline numbers. The company has recently launched a slew of new products and services aimed at helping seasoned as well as new-to-investment users. It aims to achieve over 10 million users and 75 million yearly transactions in financial year 2022 with the majority of users from small cities and towns.

According to a recent report by Bernstein on Paytm, the company is ready to evolve into a fintech platform from a payments business. The Paytm ecosystem covers payments (wallet/UPI), merchant acquiring, credit saving, asset management, insurance and broking services to complement its ecommerce/e-ticketing platforms. “Paytm has over 350 million installed base, 50 million active user base, and over 20 million merchant base. Around 100 million of those users are KYC compliant. Paytm’s non-payment businesses are scaling rapidly. It is aggressively working to monetise across multiple verticals to break-even in 12-18 months,” said the report.  

The company has also been rewarding its employees with stock options. In April, this year it added 242,904 stock options, taking the overall Employee Stock Ownership Plan (ESOP) valuation to $604 million. The addition takes the existing ESOP pool to 2.4 million equity options. Also as reported by media, if Paytm does list by November this year, 2021 will turn out to be the year of IPOs for the startup sector.

Food delivery player Zomato has already filed its draft red herring prospectus (DRHP) and is planning to raise over Rs 8,000 crore. PolicyBazaar, India’s largest online insurance company has stated that it is gearing up for an IPO. According to reports, the company is looking to raise Rs 4,000 crore via IPO, while seeking a valuation of $3.5 billion.