One97 Communications, the parent company of digital payment services Paytm, has filed a draft red herring prospectus (DRHP) with markets regulator SEBI for an initial public offering of ₹16,600 crore.
As per the DRHP, the company will issue fresh shares worth ₹8,300 crore with a face value of ₹1 each. Existing shareholders, including the founder and CEO Vijay Shekhar Sharma, Antfin (Netherlands) Holdings, Alibaba.com Singapore E-commerce Pvt. Ltd., Elevation Capital, Saif Partners India and BH International Holdings would offload stakes worth ₹8,300 crore.
However, the document did not mention how much stake the various existing shareholders would be selling.
From the total net proceeds, the company proposes to invest ₹4,300 crore in growing and strengthening the Paytm ecosystem, including through acquisition of consumers and merchants and providing them with greater access to technology and financial services. Further, ₹2,000 crore would be utilised for investing in new business initiatives, acquisitions and strategic partnerships.
The company’s loss for the year ended March 2021 narrowed to ₹1,701 crore compared with a loss of ₹2,942 crore for 2019-20 and ₹4,230 crore for 2018-19. Total income dropped almost 10% to ₹3,186 crore in 2020-21 from ₹3,540 crore in 2019-20.
Among the various risk factors mentioned by the company in the DRHP, it has specified that it expects to continue to incur net losses for the foreseeable future and may not achieve or maintain profitability in the future. “Because the market for our platforms, products and services is evolving, it is difficult for us to predict our future results of operations or the limits of our market opportunity. We expect our operating expenses to increase as we hire additional personnel, expand our operations and infrastructure, both domestically and internationally, continue to enhance our platforms and develop and expand its capabilities, expand our products and services, and expand and improve our interface,” the company said.
These initiatives, it added, may be more costly than we expect and may not result in increased net revenue.
However, it also noted that a lot of trends may work in its favour such as India is a country of hundreds of millions of young and aspiring consumers who are underserved in payments and financial services products.
“There are millions of small businesses in India that would benefit from having increased access to affordable software, technology and financial services. We believe these consumers and small businesses can be served through technology-led, digital-first commerce...we have a large addressable market in India. The market segments that we serve have large growth potential, due to significant under-penetration, and the ability of technology to grow the market,” the company said.
Other favourable trends include strong macro tailwinds, increasing pace of digitisation, under penetration and rising digitisation of financial services and regulatory initiatives driving digitization of payments and financial services.