With shares falling in India, the parent company of Paytm, a leading digital payments app, went public on Monday in hopes of becoming the country’s largest initial public offering.
The company, One97 Communications, aims to raise around $ 2.5 billion in a three-day bid that ends Wednesday. It has already attracted huge institutional investors like the Abu Dhabi Sovereign Fund, the Texas Teachers’ Pension Fund and the University of Cambridge, who have invested more than $ 1 billion.
Paytm was founded in 2010 as a payment transfer company. It now allows users to send money to friends, buy small items like coffee or clothes, and fund big-ticket items like cars.
Almost ubiquitous in India’s largest cities, Paytm controls over 40% of the Indian digital payments market. The company has yet to make a profit, but is enjoying renewed interest from foreign and Indian investors seeking a stake in India’s booming internet economy. The IPO could value the company at $ 20 billion.
âPaytm is emerging as a market in itself,â said Amit Khurana, analyst at Dolat Capital in Mumbai. “There is a lot of appetite to allocate money to this kind of model because it is seen as the company of the future.”
Investors, in general, are increasingly optimistic about the recovery of the Indian economy after the pandemic and a series of related lockdowns that have sharply reduced industrial activity and consumer spending.
India’s central bank, the Reserve Bank of India, has steadily cut interest rates, encouraging banks to lend more and consumers – especially savvy young online shoppers – to spend more.
“We are now in an ideal situation, where the banking recovery coincides with the demographic transition, which in turn coincides with the digital revolution,” said Madhavan Narayanan, economist in India. “All of these three align the sun, moon, and stars for young India.”
With coronavirus infections in India and pedestrians returning to physical stores, shoppers new to sanitation awareness may prefer to scan QR codes rather than handle cash.
The pandemic has contributed to a trend in India towards a cashless economy that began with the sudden demonetization of Prime Minister Narendra Modi’s government in 2016. The policy, aimed at cracking down on money laundering, banned local banknotes. more widely disseminated, wiping out families’ savings and closing businesses overnight. But five years later, it appears to have created some winners as well, including digital payment companies like Paytm.
Competition is intensifying. Google offers Google Pay. India’s richest man, Mukesh Ambani, launched a joint venture with Facebook last year to offer digital payments on WhatsApp, India’s most popular courier service.
Paytm’s stock offering is the latest in a series of oversubscribed IPOs in recent months, among a host of so-called unicorns backed by e-commerce giants like China’s Alibaba and its financial affiliate, Ant .
In July, institutional and foreign investors also flocked to the initial public offering of India’s food delivery app, Zomato, which was oversubscribed 38 times the available shares.
The Reserve Bank of India predicted in an August report that 2021 “may well be the year of India’s initial public offering.”
Paytm’s push to become India’s largest initial public offering has overshadowed another large offering. The parent company of Nykaa, an online beauty retailer, was listed on the stock exchange on Monday, seeking a valuation of $ 7.4 billion.
Sameer yasir contributed reports.