One97 Communications Ltd, the parent company of digital payments platform Paytm, has filed its draft documents with market regulator Securities and Exchange Board of India (SEBI) for an initial public offering (IP) to raise up to ₹16,600 crore. This comes close on the heels of the IPO of food delivery start-up Zomato, which closed to retail investors on Friday.
The Paytm IPO will include the issuance of new shares worth ₹8,300 crore and an offer-for-sale (OFS) by existing investors worth ₹8,300 crore.
Buzz on unlisted market
According to a report in Mint, Paytm shares have seen strong demand in the grey (unlisted) market following its filing of the DRHP (draft red herring prospectus) on Friday. ‘Grey market’ refers to channels where shares of a company are bought and sold outside the official trading channels.
“In the unlisted market, shares of Paytm are in high demand. The company share price has increased from ₹1,000 before the news of the IPO to ₹2,500, as per market reports. We have a positive outlook for the Paytm IPO,” the report quoted Yash Gupta, Equity Research Associate, Angel Broking Ltd, as saying.
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The report further said that in June, too, when news surfaced that Paytm was launching an IPO soon, its stock had seen brisk demand in the grey market. An Economic Times report noted that unlisted shares of Paytm have more than doubled over the past two months. “The adjusted stock price post share split has shot up to ₹2,450-2,500 from ₹900-950 in May 2021,” it said.
Strong investor appetite
A Money Control report said Paytm’s IPO will be India’s biggest public issue so far, a record that was previously held by Coal India, which had launched a ₹15,000 crore IPO in 2010. It’s an indicator of the appetite for internet companies among institutional investors, said the report.
ICICI Securities, JP Morgan, Morgan Stanley, Citibank and HDFC Bank are some of the book-running lead managers to the issue. According to the DRHP, Paytm will use about ₹4,300 crore of the proceeds for customer and merchant acquisition and other growth initiatives, and ₹2,000 crore in new business initiatives, acquisitions and strategic tie-ups.
The Money Control article recalled that back in 2010, One97 — which then used to offer mobile value-added services (VAS) for telecom customers — had sought to launch a ₹120 crore IPO. Prevalent market volatility then forced it to drop the plan.