But they only set up their Payments bank in 2017 and these banks come with a whole set of restrictions - a cap on deposits, no lending, stuff like that. Now ideally, they’d want to do the lending themselves and keep the whole pie. And by facilitating the loan, Paytm takes home a nice cut. In fact, this could be the only place where you could get yourself a quick loan. This could help them gauge your creditworthiness. If you were a merchant whose transactions were routed through Paytm’s gateway, the company knows a lot about your business. Think merchant loans through partnerships with banks and non-banking financial companies like Clix Capital. But by capturing the P2M segment, Paytm has the opportunity to make money off of its payment gateway and other value-added services on top. When you transfer money to a friend, no intermediary makes money. And that’s the segment that matters.īecause UPI doesn’t make anyone money. The value transacted on its P2M segment has grown by 33% year-on-year for the past 2 years and the total number of merchants have exploded - from 7 million to over 20 million. P2M is when you visit a store and make a payment to the store owner. But it’s the peer-to-merchant segment (P2M) where it’s truly dominant with a 50% share. Now Paytm has a share of 13% in overall UPI payments. But if you had to parse through the super app, and look at the big verticals that bring in money, you’d have to start with UPI - the Unified Payments Interface (UPI), India’s instant payments mechanism. You can find everything if you wanted to. So, perhaps Paytm is in some ways what many people would call a “super-app.” And in 2016, a surprise move by the Indian government (demonetisation) gave a fillip to digital payments, and through it Paytm.īut, what does the company do really - Are they a digital wallet? Payments bank? E-commerce company (a bet that didn’t quite pan out)? Fantasy sports? Ticketing (part of their commerce and cloud segment)? Mutual funds? Stockbroking? Insurance? You could load money into the wallet and make payments to utility companies - pay electric bills for instance. By 2014, it had become a digital wallet i.e. And while it has come at a cost, Paytm's losses have narrowed a bit in the face of stagnating revenues.Īlright, with that stuff out of the way, let’s look at the business itself - taking a trip all the way back to 2010 when Paytm started as a platform to let people top up their mobile phone balance. Paytm has cut back significantly on those cashback and incentive schemes. So maybe all this confidence is a good omen for the IPO? And there aren’t the kind of investors who buy today and sell tomorrow. We’re talking about the big guns - asset management companies including the likes of BlackRock and the Canada Pension Plan Investment Board. Paytm has already wrapped up a significant chunk of the fundraising effort! That’s right, the company has raised ₹8,235 crores from anchor investors. Make no mistake - This is an expensive stock. And that puts the valuation at about $20 billion (₹1,49,000 crores) - 70x its operating revenue of ₹2,109 crores (as of March 2021) - a rather steep premium even compared to its global peers. Paytm is pricing the IPO between ₹2,080–₹2,150 per share. Out of the ₹18,300 crores Paytm is likely to raise, it will pay ₹10,000 crores to existing investors who will be cashing out their stake.Īnd the balance of ₹8,300 goes straight into Paytm’s account so that it can make a dent in the fintech industry in the years to come. And if you’re wondering why this jump, it’s probably because the company shelved plans to raise a pre-IPO round of ~₹2,000 crores. This is higher than the ₹16,600 crores that it was expected to raise earlier.
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