Paytm to ask shareholder nod for $1.6 billion sale of new stock

Paytm is obtaining stakeholders’ approval to liquidate nearly Rs. 120 billion in new stock. If the Indian digital-first payments firm gets the nod from shareholders, this could turn into South Asia’s biggest IPO to date, worth a whopping $1.6 billion.

This firm has the backing of Japan’s SoftBank (18.73%), Elevation Capital (17.65%), and China’s Alibaba and Ant Group (38%). Per a notice to set up an extraordinary meeting of stakeholders in Delhi on 12 July, Paytm expressed the desire to sell new shares and retain an over-subscription of a maximum of 1%.

To prepare for the initial public offering, the company has hired financial names like – ICICI Securities, JPMorgan Chase, Goldman Sachs, and Morgan Stanley. The extraordinary general meeting is likely to witness a proposal of relieving its founder, Vijay Shekhar Sharma, from the company’s ‘promoter’ role.

Currently, the founder holds a total of 9,051,624 shares, i.e., 14.61% of the paid-up equity share capital (fully diluted basis). Hence, Sharma presently enjoys substantial control over the company’s decision-making process. If he’s relieved from his current role, he’ll be only a shareholder without the special rights conferred upon him as a founder.

Additionally, several amendments could be on the cards to more than one employee stock options as per sources. Paytm is taking this step before its local listing to be classified as a professionally managed company.

Paytm IPO – Prospect

Previously, Paytm was discreet about how much they intend to raise through its initial public offering, which is now stated at $1.6 bn or Rs. 12,000 crores. However, Paytm did not specify if its existing shareholders will need to sell their units.

Paytm is also planning a pre-IPO funding round. Following it, the offer’s size could be reduced to the extent equivalent to the equity shares issued under this pre-IPO placement.

Paytm’s growth and business model

The digital payment firm was launched 10 years ago as a mobile recharge platform. Over the years, it witnessed exponential growth as Uber listed it as one of its payment options. Subsequently, ensuing demonetisation in 2016, Paytm, like several other digital platforms, witnessed a surge in users and demand.

The platform recently diversified its services and offerings, including bank deposits, flight ticket booking, movie ticket booking, insurance, gold investment, and remittance.

Parting thoughts

The upcoming IPO could catapult Paytm into a stronger market position and help it expand its market presence, and boost visibility significantly. Investors with high expectations from digitalising payment and online services should keep a close tab on this company.

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