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- The DRHP mentions a Rs 16,600 Cr Fundraise
- Split - 50% Fresh, 50% OFS
- Valuation of $25-30 billion targeted from this IPO
Let’s put all of these numbers into perspective here –
https://t.co/Lq4B0zrrwF https://t.co/cq9LrsQ1nd
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Some big numbers, right? Ok back to PayTM now –
What does it do?
Well, it does a lot of things but at the core of it let's term it a fintech company.
- It started as a digital wallet-based platform focused on mobile SIM top-ups and utility payments in 2010
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- They pivoted to marketing, mobile phone top-ups, payments, e-comm, then a full-scale fintech services company – The avatar that we see today
- The Paytm ecosystem has payments (wallet / UPI), merchant acquiring, credit, savings, broking, wealth management, and insurance.
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Total users - 333 mn
Monthly active users - 50 mn
Merchants - 21.1 mn
RedSeer - Paytm has a payments transaction volume market share of ~40% and wallet payments transaction mkt share of 65-70% in India for FY21
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Some notable investors in PayTM are Ant Group, Softbank, Warren Buffett, and even Mr. Ratan Tata (extremely small investment holding but).
Also time for a fun fact :)
https://t.co/Hkrp8KpcRt
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What will they do with the raised money? (Fresh issue part of 8300 Cr)
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Paytm Payments Bank
Paytm owns 49%, Vijay Shekhar Sharma(VSS) holding the rest 51%. Why 49%? That’s because of FDI rules. The policy restricts foreign investment in the banking sector (through the automatic route) to 49%
Note - PayTM has an option to buy out VSS stake
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About PPB -
- Paytm Payments Bank is the only profitable arm of Paytm
- Offering of a Savings account, 2.5% per annum, the max balance of ₹200,000 as per RBI Rules. Also has a partnership with Paytm Money, the wealth management business.
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Offerings of PPB -
Wallet – Secure digital wallet, allows customers to make payments at 87,000 online merchants, 21.1 mn in-store merchants, FY21 - 333 mn Paytm Wallets
Post-paid – BNPL (buy no pay later) to customers across their merchant base
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FASTags –Largest issuer, as of FY21 issued a cumulative of ~ 9 million FASTags, with a market share of 28%.
UPI - 155 mn+ UPI IDs. Doesn’t reveal the no. of UPI transactions which is the better metric to know about the hold of payments it has.
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Data from NPCI - Paytm 13.6% market share in the volume of UPI transactions in June 2021, up from the 10.3% it had in June 2020.
FDs - Via partnership with Indian commercial banks. FY21 - FDs ₹1750 Cr
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Total deposits - 5200 Cr+ including savings accounts, current accounts, fixed deposits with partner banks, and balance in wallets
Debit Card and Paytm Credit Card - Offer co-branded credit cards
FY21 - Paytm Payments Bank had 6.4 Cr bank accounts
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Gross Merchandise Value (GMV) and Merchants
- Majority of revenue is from transaction fees collected from merchants for payment services
- Revenue from payment + financial services accounted for 52.5%, 58.1%, and 75.3% of total revenue in FY19, FY20, and FY21 respectively
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Some Key Indicators (payment, Financial services on the rise while commerce/cloud on the decline)
Financials –
Balance Sheet – 2876 Cr cash, 2375 cr in other financial assets, IPO only to give exit to PEs and raise a war chest for cash burn/acquisitions, etc
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P&L - Loss narrowed down (optical or long term? no one can say) due to lesser marketing expenses further aided by lower payment processing charges (img)
It has to be seen if the payment processing charges as % of GMV falls down further from here (currently at 0.5%).
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Cash Flows - bad Cash flows.
Super App Play
FY21 - 480 mini-apps+ on the platform ranging from content to transaction apps and across a broad range of industries, including food delivery, gaming, e-commerce, and with a visitor base of 5.7mn MAU
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Valuations & Conclusion
PayTM didn’t report an operating profit or a net profit in FY21.
They clocked sales of Rs 3186 Cr in FY21 and we also know that they are said to be targeting 25-30bn$ as per various news sources.
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At 25 bn $, the P/S (price to sales) will be 58x and at 30 bn $, the P/S will be 71x!
They don’t even own full of PayTM payments bank which is the only profitable entity, not that it makes a large difference as the FY21 Sales for PPB was Rs 1987 Cr and net profit Rs 18 Cr
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Outlook -
The growth in Digital will come from –
Development of the Ecosystem – Digital payment adoption by Small businesses/merchants, PoS machines, QR Codes, UPI, Payment Gateways, etc
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Mobile Wallets and UPI – Set to increase with the number of increasing mobile phone users and mobile digital payment users
Increasing penetration of digital banking products
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According to RedSeer, in FY21 there were 30-35 mn unique merchants using QR codes for digital payments in India and expected to increase to 55-60 mn by FY 2026. Out of all the players driving QR adoption, Paytm has the highest QR code coverage amongst merchants.
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Point of Sale (PoS) machines - TPV (Total Payment Value) of PoS is expected to reach USD 275 bn in FY26 from US$ 94 bn in FY21
Payment Gateways and Payment Aggregators – TPV of payment aggregator is expected to reach US$ 550 bn in FY26 from USD 170 bn in FY21
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End of thread! Thanks for reading!
Stay tuned for more :)
