PayTm may Scrap pre-IPO placement
Ahead of its mega IPO, Paytm plans to scrap its Rs.2,000 crore pre-IPO placement exercise as it was unable to agree with investors on pricing and valuations. Paytm is slated to hit the market with an IPO of Rs.16,600 crore which would include a fresh issue of Rs.8,300 crore and an offer for sale of Rs.8,300 crore. It is slated to be the largest issue in Indian IPO history.
The differences over valuation became apparent after Paytm and the investment bankers started talking to potential global investors and domestic institutions. Paytm is apparently seeking a valuation of over $20 billion but the market consensus appears to be closer to $17-18 billion. The last round of funding done by Paytm was at a valuation of $16 billion.
Paytm is into digital money, online market place, UPI transfers, wallets and also Paytm money activity. However, it has seen the pressure of competition from Amazon and Flipkart. Both have deep pockets since Flipkart is now owned by the US based Wal-Mart Inc. The pre-IPO placement of Rs.2,000 crore would proportionately reduce the IPO amount.
As of now, SEBI is yet to approve the DRHP filed by Paytm but that is expected to come in over the next few days. Paytm currently has two choices in front of them. It can either opt for a pre-IPO placement at a lower valuation or it can scrap the pre-IPO placement altogether. Currently, Paytm is open to both options and is awaiting SEBI approval for DRHP.
Ahead of large IPOs, companies do two types of share sales. There is the pre-IPO placement which is done much ahead of the IPO and can be at a discount but comes with a longer lock-in period. They can also do an anchor placement just ahead of the IPO, which has to be at the same price as the IPO price but has a lock-in period of just 1 month.
The success of the Zomato IPO, which got subscribed 38 times despite its size of Rs.9,375 crore has enthused digital plays to use the India route. The next few weeks will see mega digital IPO like Paytm, Nykaa, Policybazaar and MobiKwik among others. It would be the real acid test of the institutional and retail appetite for loss making digital IPOs.
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