Paytm goes aggressive for M&A ahead of IPO

Paytm goes aggressive for M&A ahead of IPO

Paytm, founded in 2008, is in the business of providing Telecom-based value-added services to various telecom operators across the Territory and Payment gateway aggregator services, Ticket services, Utility bill payments Insurance, Hotel booking services, and Stock Broking, among other things. During demonetization in 2016, they saw a significant increase in sales. The company’s overall expenses were reduced by 20 percent in 2019-20 to Rs 5,861 crore compared to Rs 7,254 crore in the previous fiscal year.

Over the past years, Paytm has made significant inroads into the Indian retail market. The company has entered partnerships with several retailers, bank accounts, and telecom operators to enable cashless transactions across the country. 

Apart from this, earlier this month Paytm surprised the industry by announcing its intention to mop up about $3 billion via its primary float. The transaction is one of the largest in the Indian fintech space and will give Paytm access to a large database of valued customers.  

Paytm aims for a $25-$30 billion valuation, which is nearly double its previous cash round of $16 billion. Paytm’s initial public offering (IPO) could be the largest in India’s history. One97 Communications, Paytm’s parent company, plans to issue new shares worth Rs 12,000 crore ($1.6 billion) ahead of its planned IPO, the company announced in a notice to shareholders ahead of its next extraordinary ordinary meeting. In FY21, One97 Communications saw its consolidated income from operations drop 14% to Rs 2,802 crore. 

Despite this, losses decreased to Rs 1,701 crore for the fiscal year, down from Rs 2,942 crore in FY20. In a recent letter to shareholders, the company stated that it expects to halt operations by the end of FY22.

Paytm and food aggregator Zomato, pre-owned vehicle startup CarTrade, e-pharmacy PharmEasy, cosmetics e-commerce omnichannel Nykaa, and online insurance aggregator PolicyBazaar are expected to make their debut on Dalal Street.

The conversations are still in the early stages, according to sources, and it is unclear which of these organizations will be interested in collaborating with Paytm. To improve its profitability, the company wants to close the acquisition before its Initial public offering (IPO).

Although Paytm has its payment gateway, BillDesk, Infibeam Avenues, PayU, and Razorpay are well-established in the ecosystem and operate niche companies.

The domestic payment gateway market is expected to increase 15% yearly to $100 billion by 2025, according to industry analysts.

Paytm is looking for a few acquisitions, according to market sources, before going to the public markets to raise funding. To maintain its market dominance, the corporation is attempting to demonstrate some aggression and action.

Cube26, a digital business that develops numerous social interaction tools, was bought by Paytm in 2018. Paytm also purchased O2O deals platforms Little and Nearbuy in December 2017, arranging for their merger and strategic investment in the resulting firm for a controlling interest.

Paytm has previously purchased a majority share in the ticketing company Insider. The purchases are in keeping with Paytm’s objective of extending the sectors in which its digital payment services are used by becoming more than just a digital wallet.

The current market price of Paytm unlisted shares is Rs.10700 per share in the unlisted market. In recent years, it has decreased in value from Rs. 18000. When Softbank invested new capital in Paytm in November 2019, the company was officially valued at $16 billion.

According to SEBI regulations, the promoter of the company must own at least 20% of the company. As a result, before the IPO, the Paytm board decided to remove the “Promoter” tag. The good news is that Paytm is working to become a PMC (Professionally Managed Company). SEBI must approve the PMC status. If this occurs, Paytm will be valued well since PMC firms are thought to be better managed than promoter-driven enterprises.

Investments can be tough and without the right information, it is not possible to put in the funds. Thus stay connected with Babli Investment for more such information. We will never make it go wrong. 

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