Paytm was started in the year 2000 by its parent company One97 Communications with a loan of 8 lakhs by its promoter Vijay Shekhar Sharma. In 2010, Paytm was established as a mobile wallet through which consumers could recharge their smartphones. And in 2021, the company launched the biggest IPO in the history of the Indian Equity market.

Seems like a story that is too good to be true. But Yes, this is the story of Paytm. The Principal Board of Paytm had approved the biggest IPO ever in the history of the Indian Equity Market. The total value of the IPO was $3bn (nearly 22,000 crores).

Was the IPO Hyped?

Paytm is one of the established players in the Fintech space with deep market penetration and share. It started as a payments interface and got into alternate banking by becoming a payments bank.

It is of prime importance for us to understand why was this IPO so hyped. Why was the Grey market of IPO so ‘Gung ho’ about Paytm IPO when Paytm was still a loss-making entity. Anyways, the losses were coming down considerably Year on Year basis.

The reason for the Paytm IPO hype is that the future seems to be bright for this e-commerce payment giant. The investment in this IPO would be more on the potential for a great business in the future.

The total value of the IPO was $ 3bn (nearly 21500 crore rupees). So far the biggest IPO which India has seen is Coal India and it was valued at Rs. 15,475 crores.

How does Paytm make money?

Paytm is India’s largest mobile payments, e-wallet, and commerce platform. It offers UPI payments, Paytm Wallet, Online recharges, bill payments, Digital gold, investment in stocks/mutual funds through Paytm Money, as well as Paytm Mall and in-store payments.

Looking into the Paytm Business Models, it makes money in two forms:

Commissions: Paytm makes money from customer transactions while using its platform through various commissions.

Escrow Accounts — Paytm holds assets or escrow money is held by a third party or customers and also generates revenue from them.

Cross-Selling — Paytm also makes money by partnering with other financial institutions and banks to sell their products and services (like insurance, investments, loans etc.) along with its own.

Early Investors of Paytm

Before understanding more about Paytm IPO in detail, let us understand who are the existing and early investors and shareholders of Paytm:

Alibaba’s Ant Group (29.71%)

Softbank Vision Fund (19.63%)

Saif Partners (18.56%)

Vijay Shankar Sharma (Founder, 14.67%)

AGH Holding, Berkshire Hathway, T Rowe Price, and Discovery Capital (holding slightly less than 10%)

More Details on Paytm IPO and Stock

Paytm stock is a wealth destroyer since listing and plummeted over 70 % from its issue price of Rs 2150. It was listed on exchanges on 18 November 2021. The total mcap erosion since the listing was over Rs 1 trillion.

Paytm surges 13%, the biggest gain in four months. The stock hit a high of Rs 592.40 on BSE, up 13 %, its maximum gain since 24 November 2021. At 12.20 pm, the scrip was trading at Rs 585 on BSE, up 12% from its previous close. Now is it is trading on Rs 450.

Paytm has come a long way from a simple digital wallet business to an integrated payments ecosystem. We believe the next stage of growth will be led by financial services, particularly delivering seamless credit tech products to consumers and merchants. With increased financial discipline (rare in the hyper-competitive payments space), Paytm is on track to break even in 18–24 months. We expect Paytm to continue being the largest payments and fintech ecosystem in India.

As we can see from above, Paytm over the last 5 years has been spending much more than what they have earned. But the situation seems to be getting better and if the predictions are to be believed, it should be a profit-making entity by 2023.

Was it worth investing in Paytm IPO?

To answer this question in simple “Yes”, but with precautions and after carefully looking into the real valuation at which Paytm offers its shares in the IPO. For starters, they are backed by investors known for investing their money with utmost care and their money more often than not generates substantial returns. Their business model is based on what the future of e-commerce and digital banking will look like. And most importantly, they have already a huge customer base and their brand is very well respected.

Closing Thoughts

From the discussion above on Paytm IPO details and share value today, we understand that apart from being one of the biggest IPO to be ever listed in the Indian equity market, this IPO has also goof tremendous response from the Pre-IPO market. Things only look bright for this digital payment and e-commerce giant. Paytm can fall below Rs 450, stay away from such glamorous IPOs and shares. The market has already discounted the risk of outright nuclear war and extreme hawkish behaviour by the US Fed. Traders can benefit from taking positions based on what may or may not happen as markets keep moving up and down. But any massive push by the Fed, or China support for Russia, or rapid rate hikes could bring a fresh round of correction.

On Paytm, which corrected 70 percent from its issue price, the company has no clear business model yet and the retail investor will take time to get clarity and understanding. Meanwhile, their stock price may drop below the target of Rs 450. In general we stay away from such glamorous IPOs and shares.

That’s all for this post. Do let us know if you liked the provided Paytm details. And have you purchased its share or not? Comment below. Cheers!

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