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- Initial public offering is the process by which a private company can go public by sale of its stocks to general public.
- A company offering its shares to the public is not obliged to repay the capital to public investors.
What has happened?
- Paytm has filed a draft prospectus with the capital markets regulator to raise Rs 16,600 crore ($2.2 billion) in what will be the biggest Indian initial public offering (IPO) in at least a decade.
- The Paytm IPO will comprise equally of a fresh issue worth Rs 8,300 crore ($1.1 billion) as well as a secondary issue or an offer for sale of the same size, the Noida-based fintech firm has told the Securities and Exchange Board of India (Sebi).
- Paytm may also consider a pre-IPO funding round of up to Rs 2,000 crore and if that happens the size of the fresh issue will be accordingly adjusted, the filing stated.
- The company didn’t divulge the valuation it is seeking in its IPO, however, sources in the know told ET that the company is targeting a valuation in the band of $24-$30 billion.
Existing investors
- Paytm investors, most significantly Ant Group, are expected to dilute their stakes in the company.
- In addition to the Chinese fintech giant, which holds more than 30% in Paytm, others expected to offload stake include Alibaba, SoftBank, Elevation Capital as well as Paytm founder Sharma.
How biggest?
- Paytm’s IPO, which is likely to open around Diwali this year, will be one of the largest to debut on Indian stock exchanges in dollar terms,
- After Coal India (~$3.3 billion) in 2010 and Reliance Power (~$2.4 billion) in 2008.
- 75% of Paytm’s public issue will be reserved for qualified institutional buyers (QIBs) while 15% for non-institutional investors (NIIs) and the balance 10% for retail investors.
Will it remain foreign owned after IPO?
- In its draft filing, Paytm said it currently is a “foreign-owned and controlled” company and will
- continue to be so after the IPO,
- In accordance with the consolidated FDI policy and foreign exchange rules and “accordingly we shall be subject to Indian foreign investment laws”.
Paytm’s future plans?
- From the proceeds of the IPO, Paytm said it plans to use Rs 4,300 crore to grow and strengthen its ecosystem through
- “Acquisition and retention of consumers and merchants” by providing them with greater access to technology and financial services.
- It would invest up to Rs 2,000 crore for new business initiatives, acquisitions and strategic partnerships.
- The rest of it would be for general corporate purposes.
- The SoftBank- and Alibaba-backed company said it will continue to make losses in the foreseeable future.
- “Because the market for our platforms, products and services is evolving, it is difficult for us to predict our future results of operations or the limits of our market opportunity,“
- it said in its draft IPO filings.
- Paytm is expecting its operating expenses to increase as it plans to hire additional personnel and expand operations and infrastructure in India and abroad.
Q) Paytm has applied to the RBI for a New Umbrella Entity (NUE) licence. NUE is related to which among the following?
- Full fledged banking license
- Retail Payment system
- Business to Business payment system
- Foreign exchange system
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