With its $ 2.46 billion target, Paytm, backed by Ant Group, SoftBank, will be Berkshire Hathaway, India’s largest IPO.
India will see its largest initial public offering ever with the nearly $ 2.5 billion digital payment platform Paytm, which was already a record year for share listings
Paytm is backed by Chinese tycoon Jack Ma’s Ant Group, Japan’s SoftBank and Warren Buffett’s Berkshire Hathaway, which together own about a third of the company.
The firm was founded barely 10 years ago by Vijay Shekhar Sharma, the son of a teacher who says he learned English by listening to rock music.
He was named India’s youngest dollar billionaire four years ago at the age of 38 and now has a net worth of $ 2.4 billion, according to Forbes.
Its nearly 14 percent stake is likely to make it much richer with the IPO opening on Monday.
Paytm will issue new shares worth 83 billion rupees ($ 1.1 billion), while existing shareholders will sell shares worth $ 1.34 billion, according to the prospectus.
The IPO is expected to make Paytm India’s most valuable technology company with a valuation of $ 20 billion, 25 percent more than two years ago.
The platform was launched in 2010 and has quickly become synonymous with digital payments in a country traditionally dominated by cash transactions.
It has benefited from the government’s efforts to curb the use of cash – including the demonetisation of almost all banknotes in circulation five years ago – and most recently from COVID.
“I did not know corona[virus pandemic] would happen, but Paytm was very helpful to me during the pandemic, ”grocery store owner Naina Thakur told AFP news agency.
Thakur said about a third of her customers pay her for milk, bread and other daily groceries via Paytm.
“It’s a lot easier than a bank transfer because they only need my cell phone number to pay and I get the settlement within seven hours,” she said.
Thakur is one of nearly 22 million Indian store owners, taxi and rickshaw drivers and other sellers who accept payments as low as 10 rupees ($ 0.13) using Paytm’s ubiquitous blue and white QR code stickers.
The platform had 114 million active annual users, according to the company’s regulatory filing in July.
The company said it entered into transactions worth more than $ 54 billion in the 2020-21 financial year.
The number of mobile payments in India has skyrocketed over the past four years, accounting for 26 billion transactions in 2020-’21.
Motilal Oswal, a Mumbai-based financial analysis firm, estimates that mobile digital payments in the country will exceed $ 3.1 billion in value by 2026.
‘Losses for the foreseeable future’
But Paytm has consistently made losses and is not sure if it will make a profit. Last year, it reported a net loss of 17 billion rupees ($ 231.6 million) on revenue of nearly 32 billion rupees ($ 436.1 million).
“We expect to continue to suffer net losses for the foreseeable future and we may not be profitable in the future,” the prospectus warned.
Paytm has reported negative cash flow over the past three years, mainly due to operating losses.
With its $ 2.46 billion target, Paytm Coal would surpass India’s $ 2 billion spending in 2010 to become India’s largest IPO.
Prior to the offer, Paytm last week raised 82.35 billion rupees ($ 1.1 billion) from 74 anchor investors, including BlackRock and the Canada Pension Plan Investment Board.
Paytm will issue shares in a price range of 2,080-2,150 rupees ($ 27.9- $ 28.9) in the offer, which is expected to close on Wednesday.
Hemang Jani, head of equities strategy at brokerage firm Motilal Oswal Financial Services, told Al Jazeera that although there is investor appetite for fine technology and new ventures both in India and worldwide, “at some point investors will be asking questions about the business model, profitability and cash flow “.
Indian companies have so far raised a record $ 9.7 billion through IPOs in 2021, figures from market monitor Prime Database have shown.
Food delivery giant Zomato was the country’s largest IPO of the year to date with its $ 1.3 billion share issue in July.