Paytm IPO: India’s biggest IPO opens Today

Paytm’s Rs 18,300-crore initial public offering (IPO) — India’s largest public offering to date — began accepting subscriptions on Monday, with a price range of Rs 2,080-2,150 per share. Paytm shares were spotted trading at a premium of Rs 60 per share over the IPO price in the primary market. According to persons who trade in unlisted shares of firms, Paytm shares were trading for Rs 2,210 per share in the grey market, an almost 3% premium. There are no publicly traded companies in India that operate in a similar industry to Paytm. The subscription period for the public sale will end on Wednesday, November 10, 2021.

The share allotment is planned to take place on November 15th, and the shares are expected to be listed on November 18th, 2021.

Expensive appraisals

In terms of finances, Paytm made a profit of Rs 1,701 crore in FY21 after generating Rs 2,802 crore in revenue. According to analysts, sales growth does not appear to be particularly interesting. The corporation has reduced its losses mostly through reducing marketing and advertising costs. “Among all the companies, Paytm is a great example of well-diversified enterprises, but it lacks unambiguous leadership in practically all areas,” said Abhay Doshi, Founder of UnlistedArena.com, which deals in Pre-IPO & Unlisted Shares. Doshi went on to say that at the higher end of the band, post-issue sales to market cap is roughly 49x, making the issuance costly.Aside from valuations, Doshi believes the company’s path to profitability is more difficult. “Because the business is so competitive, it’s very likely that Paytm will continue to lose money in the foreseeable future to maintain its market share,” he added.

Is it worthwhile to invest in Paytm’s initial public offering (IPO)?

Paytm is worth 49.7 times its FY21 revenues. While valuations may appear to be high, according to Jyoti Roy, DVP- Equity Strategist at Angel One, Paytm has become synonymous with digital payments via mobile and is the market leader in the mobile payment arena. “Paytm is well positioned to benefit from the 5x increase in mobile payments between FY2021-26,” says the report. As a result, valuations appear to be justified. “We advise investors to’subscribe’ to the offering,” Roy continued.

A significant portion of the population is underserved in terms of payment and financial services goods. There is also a large number of small firms that have yet to reap the benefits of digital commerce. According to Choice Broking analysts, One97 Communications has a big addressable market to serve. “At a higher price band of Rs. 2,150, it requires a 46.1x EV/Sales multiple, which appears excessive.” The requested valuation is also far higher than the projected IPO of China’s Ant Group in 2020.

As a result, we offer a subscribe for long-term rating to the stock, based on its growth potential and stretched values,” Rajnath Yadav, Research Analyst, Choice Broking, said.

In FY21, Paytm did not record any operating or net profits. They made Rs 3,186 crore in sales in FY21, and at a valuation of $20 billion, the P/S (price to sales) will be 47.1x, which is extraordinarily costly. “No one can predict how Paytm will pivot and become successful. In all of their companies (insuretech – legacy insurers and fintech), they confront tough competition. BNPL – Banks and NBFCs, wallets – Mobikwik, Bajaj Finance, etc., broking – zerodha, payments – razor pay, pine labs, etc., BNPL – Banks and NBFCs, wallets – Mobikwik, Bajaj Finance, etc),” Aditya Kondawar, COO, JST Investments, told Financial Express Online.