Tag: Paytm IPO

ESAF SFB, Paytm, Sapphire Foods among 7 firms to get Sebi’s nod for IPO, BFSI News, ET BFSI

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New Delhi: As many as seven companies, including ESAF Small Finance Bank, Sapphire Foods India and Anand Rathi Wealth, have received capital markets regulator Sebi’s nod to raise funds through initial public offerings (IPOs). In addition, PB Fintech, which operates an online insurance platform Policybazaar and credit comparison portal Paisabazaar, Paytm’s parent firm One97 Communications, life sciences company Tarsons Products and HP Adhesives too received Sebi’s clearance to float their IPOs.

These companies, which filed their draft papers with Sebi between July and August, obtained the regulator’s observations during October 18-22, an update with Sebi showed on Monday.

In Sebi’s parlance, the issuance of observation is equivalent to the regulator’s approval.

ESAF Small Finance Bank’s Rs 997.78-crore public issue comprises a fresh issue of equity shares worth Rs 800 crore and an offer for sale of Rs 197.78 crore by existing shareholders, according to draft red herring prospectus (DRHP).

Under the offer for sale, the promoter will be selling shares worth Rs 150 crore, PNB MetLife would offload shares to the tune of Rs 21.33 crore, Bajaj Allianz Life will offer shares of Rs 17.46 crore, PI Ventures will sell Rs 8.73 crore worth shares and John Chakola will offer shares worth Rs 26 lakh.

The IPO of Sapphire Foods India Ltd, which operates KFC and Pizza Hut outlets, will be entirely an offer of sale (OFS) of 17,569,941 equity shares by promoters and existing shareholders.

As a part of the OFS, QSR Management Trust will sell 8.50 lakh shares, Sapphire Foods Mauritius Ltd will offload 55.69 lakh shares, WWD Ruby Ltd will divest 48.46 lakh shares and Amethyst will offer 39.62 lakh shares.

In addition, AAJV Investment Trust will sell 80,169 shares, Edelweiss Crossover Opportunities Fund will offload 16.15 lakh shares and Edelweiss Crossover Opportunities Fund-Series II will divest 6.46 lakh shares.

The initial share-sale of Anand Rathi Wealth Ltd, part of Mumbai-based financial services group Anand Rathi, is completely an offer for sale of 1.2 crore equity shares by promoters and existing shareholders.

Those offering shares in the offer for sale are — Anand Rathi Financial Services Limited, Anand Rathi, Pradeep Gupta, Amit Rathi, Priti Gupta, Supriya Rathi, Rawal Family Trust, Jugal Mantri and Feroze Azeez.

According to the draft papers, Paytm plans to raise Rs 8,300 crore through fresh issue of equity shares and another Rs 8,300 crore through the offer-for-sale route.

Paytm founder, managing director and chief executive Vijay Shekhar Sharma and Alibaba group firms will dilute some of their stake in the proposed offer-for-sale.

In addition, investors selling stake include Antfin (Netherlands) Holding BV, Alibaba.Com Singapore E-Commerce Private Ltd, Elevation Capital V FII Holdings Ltd, Elevation Capital V Ltd, SAIF III Mauritius Company Ltd, SAIF Partners India IV Ltd, SVF Panther (Cayman) Ltd and BH International Holdings.

The Rs 6,017.50 crore IPO of PB Fintech comprises a fresh issue of Rs 3,750 crore worth of equity shares and an offer for sale of Rs 2,267.50 crore by existing shareholders.

As part of the OFS, SVF Python II (Cayman) will sell shares worth Rs 1,875 crore, Yashish Dahiya will offer shares worth Rs 250 crore and some other selling shareholders will also divest shares.

Tarsons Products’ IPO comprises fresh issuance of equity shares worth Rs 150 crore and an offer for sale of 1.32 crore equity shares by promoters and an investor.

As a part of the OFS, promoters — Sanjive Sehgal will offload up to 3.9 lakh equity shares and Rohan Sehgal will sell up to 3.1 lakh equity shares — and investor Clear Vision Investment Holdings Pte Ltd will divest up to 1.25 crore equity shares.

HP Adhesives’ initial share-sale consists of fresh issuance of 41.40 lakh equity shares and an offer of sale of 4,57,200 equity shares by promoter Anjana Haresh Motwani.

The company manufactures a wide range of consumer adhesives and sealants products such as PVC, solvent cement, synthetic rubber adhesive, PVA adhesives, silicone sealant, acrylic sealant, gasket shellac, other sealants and PVC pipe lubricant.

The shares of these companies will be listed on the BSE and NSE.



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RBI lauds Paytm IPO, says 2021 may turn out to be India’s year of IPO, BFSI News, ET BFSI

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The $ 2.2 billion proposed listing by a payment and financial services app symbolises investor excitement surrounding India’s digitalisation – digital payment solutions; e-commerce; logistics, says an RBI article.

The year 2021 could turn out to be India’s year of IPO with the domestic unicorns through their public issues setting “domestic stock markets on fire and global investors in a frenzy”, an RBI article said on Tuesday.

The successful Initial Public Offerings (IPOs) by new age companies in the recent months are a reflection of bullishness about Indian technology, it said.

“…growth impulse is igniting financial markets. 2021 could well turn out to be India’s year of the IPO. Debut offerings by Indian unicorns – unlisted start-ups – kicked off by a food delivery app’s stellar IPO that was oversubscribed 38 times, have set domestic stock markets on fire and global investors in a frenzy,” the central bank said in an article on the ‘State of Economy’.

The article has been authored by a team lead by RBI Deputy Governor Michael Debabrata Patra. The central bank said views expressed in the article are those of the authors and do not necessarily represent the views of the Reserve Bank.

The RBI article was referring to the IPO of Zomato which got oversubscribed 38 times.

Paytm IPO

The article further said that “the $ 2.2 billion proposed listing by a payment and financial services app symbolises investor excitement surrounding India’s digitalisation – digital payment solutions; e-commerce; logistics”.

Noting that the IPO of a specialty chemical manufacturing exporter was subscribed 180 times, the RBI said “these IPOs of new age companies arrive as bullishness about India mounts, especially around Indian tech”.

India’s tech boom, it added, has been long awaited, with strong global and domestic appetite for what are widely believed to be world class businesses in the pipeline, notwithstanding initial losses that have largely stemmed from the deep discount business models adopted by them.

These listings coincide with a broader rush by Indian companies to tap the market and the fomo (fear of missing out) factor driving investors, which have taken the benchmark indices to records, the RBI article said.

“A new era has clearly begun. It is estimated that India has 100 unicorns (Credit Suisse, 2021), with 10 new ones created in 2019, 13 in 2020 in spite of the pandemic and 3 a month in 2021 so far. They do not rely on inherited wealth or dependence on bank loans or extra-business connections, but on talent and innovative ideas. These are the children of liberalisation, not of the wealthy,” it said.

Maharaja Mac

Referring to the recent update by the UK-based The Economist of its Big Mac Index, an informal guide to currency valuation, the RBI article said that in terms of Maharaja Mac, India is currently the fourth-largest economy in the world.

“…we decided to give the Big Mac’s currency valuation powers a go by and turned it on its head. Looking at affordability or how many burgers can a currency buy relative to the US dollar, we measure how much a country’s GDP is valued in purchasing power terms,” the article said.

“Voila! The results uphold conventional wisdom – in terms of the Maharaja Mac, India is currently the fourth-largest economy in the world after China, the US and Japan.”



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IPO-bound Paytm seeks shareholders’ nod to double ESOP pool, BFSI News, ET BFSI

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Fintech startup Paytm is planning to more than double its employee stock ownership plan (ESOP) pool, as per a letter sent to its shareholders for an extraordinary general meeting (EGM) scheduled for September 2, ahead of its much-anticipated IPO.

The Noida-based firm has proposed to its shareholders an increase in the existing ESOP pool to 61,094,280 equity options at a face value of Re 1 each from the current 24,094,280 equity options. The fintech company has also sought approval of founder and chief executive Vijay Shekhar Sharma’s revised employment agreement as the managing director and chief executive of the company.

Additionally, the company is formalising three appointments to the board of directors. These are Neeraj Arora, former chief business officer of WhatsApp and Ashit Ranjit Lilani, managing partner of Saama Capital, as non-executive independent directors; and Douglas Feagin, senior vice president, Ant Group, as a director.

The company has also put forth revised annual remuneration agreements for independent directors on the board for shareholders’ consideration. These include those of Mark Schwartz and Pallavi Shardul Shroff for Rs 1.85 crore and Ashit Ranjit Lilani and Neeraj Arora for Rs 1.48 crore.

ET has reviewed a copy of the letter.

In its previous EGM on July 12, the firm had passed several resolutions, including an IPO raise, and one declassifying Sharma as the promoter to list as a professionally managed company. Listing as a professionally run business could help smoothen Paytm’s IPO process as it reduces the compliance burden from investors and individuals that are considered promoters.

Also Read: Paytm founder to have protective rights after listing

Paytm’s ESOP expansion comes at a time when several leading tech and internet startups have offered lucrative buyback windows to help employees vest their options. In 2021, startups such as Zerodha, Razorpay, Cred, Acko, Udaan have given their employees windows to cash their stock options as valuations of India’s internet startups continue to rise rapidly.

ESOPs are an employee benefit plan that gives the firm’s employees ownership in the company in the first of stock options. Among growth-stage startups, ESOP plans are seen as an effective way to attract, retain and reward workers in a highly competitive talent market.

Paytm in July had filed a draft red herring prospectus with the markets regulator, the Securities and Exchange Board of India (Sebi), to raise Rs 16,600 crore ($2.2 billion) through a public issue in what will be one of the biggest Indian IPOs in at least a decade.

Also Read: Paytm and the art of going public

The stock offering will comprise a fresh issue worth Rs 8,300 crore ($1.1 billion) and a secondary issue or an offer for sale (OFS) of the same size, Paytm has told Sebi. The company may also consider a pre-IPO funding round of up to Rs 2,000 crore. If that happens the size of the fresh issue will be adjusted accordingly, the DRHP says.



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New-age IPOs: All those 3-letter words decoded

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An interesting feature of the IPO rush this time around is the number of consumer focussed tech-driven start-ups that are lining up for going public. While Indian IPO investors have tasted Zomato, public issues of Mobikwik, Paytm, Nykaa, Policybazaar, Ixigo, Delhivery, Flipkart etc. are said to be in the pipeline. While reading offer documents of IPOs, you will come across terms such as GMV, AOV, cash burn, MAU, DAU, CAC, churn etc. As many of these new-fangled IPO-bound firms are yet to make profit, operational metrics are focussed upon. Learning these new terms becomes central to understanding the business model, prospects and multi-billion dollar valuations.

Volume measures

Volumes and transaction size are among the most important dynamics in marketplace businesses. GMV or Gross Merchandise Value is a popular metric used. GMV is the total transaction volume of merchandise transacted through the marketplace in a specific period. GMV can include taxes, fees and services, and gross of all discount. Often the most recent month or the recent quarter’s GMV is annualised. In case of Paytm, FY21 GMV is Rs 4 lakh crore.

GMV is a useful measure of the size of the marketplace. For instance, during Covid-ravaged festival season of October-November 2020, Flipkart and Amazon led the $8.3 billion festive GMV pie, indicating their massive size.

Actual revenues are only a portion of GMVs, for instance, Mobikwik’s FY21 GMV was about ₹15,000 crore but revenue from operations is ₹290 crore. Revenue consists of the various fees charged by such a company. In case of Paytm, the revenue from operations is around Rs 2,800 crore, less than 1 per cent of reported GMV. GMV is also referred to Gross Transaction Value, or GTV.

The ticket size in a business matters. Tech-driven start-ups work on volumes. Each time someone places an order, the company gets a certain sum. So, if the company can do an order by spending ₹200 and make ₹210 via fees, then it has positive unit economics.

To understand positive unit economics, you have to look at a metric called Average Order Value (AOV) which is calculated by dividing GMV by the number of orders during a given period. The higher the AOV, the better the chance of breaking-even and clearer is the path to profitability, provided the take rate is not reduced. Take rate is the percentage fee charged by a marketplace on a transaction.

Burn, churn

Cash burn for IPO-bound start-ups is an important metric. Loss-making companies fail when they run out of cash and don’t have enough time left to raise funds. Cash burn is computed by subtracting cash balance at the beginning of the year from cash balance at the end of the year. Start-ups are known to burn high cash amounts by chasing growth. When Google was burning cash in 1999-2001, money was going into building high-tech Internet products. Ditto for Facebook and Amazon in respective periods. However, many Indian start-ups burn cash to sustain businesses. And, now they are getting listed. Hence, investors must be able to identify whether the fund-raise is aimed to just meet expenses..

Once a company with high cash burn is listed on the bourses, it would have to raise money by diluting equity or get merged/acquired by a bigger business. This can impact public shareholders. When they are unlisted, firms can tap venture capital funds etc. to get cash and consequently get valued higher in each funding round to get more cash. But, this is why founders of some hyper-growth firms end up with very small equity ownership. But when they are listed, long periods of cash burn can push the company towards insolvency.

Rhyming with burn, is another important metric called churn. Businesses are successful when they do repeat business. The churn rate is the percentage of existing customers who stop doing business with an organisation over a specific time period. Successful software companies report annual churn rates less than 5-7 per cent. Check for high churn rates in companies.

High churn rates are not good, neither are higher CAC (Customer/Consumer Acquisition Cost). CAC is the cost of winning a customer to purchase a product/service and is expressed in per user terms. For instance, Mobikwik’s new registered user CAC was just ₹11.51 in FY21. Some firms such as Paytm have brought different verticals under one umbrella to lower CAC. Do note that ed-tech firms such as Byju’s may have much higher CAC, which they partially recover when customer buys a course.

Since product and engagement metrics are important for new tech-enabled start-ups, user count is very important. IPO-bound companies will like to wow investors with user engagement and growth. But the focus should be on active users, or even better, monetisable users. For example, Paytm uses a metric called MTU (monthly transacting users), which is defined as unique users with at least one successful transaction in a particular calendar month.

Users are counted as monthly active users (MAU) or daily active users (DAU). Facebook, for instance, defines a daily active user as a registered and logged-in Facebook user who visited Facebook through its website or a mobile device, or used Messenger application, on a given day. Twitter uses Monetisable Daily Active Usage or Users (mDAU) as those who logged in or were otherwise authenticated and accessed Twitter on any given day through twitter.com or Twitter applications that are able to show ads.



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IPO pie set to grow bigger as over a dozen financial services players line up Rs 55,000 crore issues, BFSI News, ET BFSI

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MUMBAI: With payments major Paytm‘s board reportedly approving a bumper share sale plan running north of Rs 22,000 crore, the IPO market is set for a big days as over a dozen financial services players, including fintechs, are set to mop up over Rs 55,000 crore this fiscal from the market, according to investment bankers.

With more than a dozen insurance, asset management, commercial banking, non-banks, microfinance, housing finance and payment bank players already filing draft documents with the market regulator Sebi for public offerings, the financial services sector is set to dominate the primary issues or initial public offerings (IPOs) over the coming months.

Some of those who have already filed the draft red herring prospectus (DRHPs) with the Sebi include Aadhar Housing Finance (Rs 7,500 crore), Policy Bazaar (Rs 4,000 crore), Aptus Housing Finance (Rs 3,000 crore), Star Health Insurance (Rs 2,000 crore), Aditya Birla Sun Life AMC (Rs 1,500-2,000 crore) Arohan Financial Services (Rs 1,800 crore), Fusion Microfinance (Rs 1,700 crore), Fincare Small Finance Bank (Rs 1,330 crore), Tamilnad Mercantile Bank (Rs 1,000-1,300 crore), Medi Assist (Rs 840 crore) and Jana Small Finance Bank (Rs 700 crore), among others.

And the board of the biggest payments bank Paytm has reportedly cleared an over Rs 22,000 crore IPO. Together, these financial services companies are set to garner around Rs 55,000 crore from the public.

If materialised, the Paytm issue will be the largest IPO ever in the country, eclipsing the hitherto largest issue — the Rs 15,000-crore share sale by the government in national miner Coal India in October 2010, says investment bankers seeking not to be quoted.

Investment bankers and analysts consider the IPO boom to be reflective of the ongoing bull run and thus advice retail investors to be cautious while parking money in new companies.

V K Vijayakumar, chief investment strategist at Geojit Financial Services in Kochi, said the performance of the IPO market usually has a strong correlation to the performance of the secondary market.

“If the stock market is bullish, it attracts a large number of investors into IPOs. Particularly, new investors lured by high potential profits, get attracted to new offers and the IPO market has always done well during market booms, Vijayakumar told .

Rupen Rajguru, head of equity investments and strategy at global wealth management firm Julius Baer in Mumbai, concurs and cautions retail investors to study the valuations very carefully before investing as the market is a but over-heated now.

“The current IPO market buoyancy is expected to continue into the next few quarters. IPOs are in fact playing on the financialisation of savings theme, which is a big structural shift in the country,” Rajguru told .

He said Julius Baer at the global level is “bullish on India as it considers it to be one of the preferred emerging markets after China”.

Though stating that the present bull market provides a favourable setting for IPOs, Vijayakumar also cautioned retail investors to be careful while applying for IPOs as some of the recent IPOs got listed at a huge discount to the tune of 30-40 per cent below the issue price. Kalyan Jewellers and Suryoday Small Finance Bank are even now quoting at a discount to the issue price, he said.

“Promoters and merchant bakers have a responsibility to price the issue reasonably to leave something on the table for retail investors. Aggressive pricing will be damaging to all,” Vijayakumar warned.

Pointing out that even good issues will be impacted by an adverse market, he said since markets are overvalued now, there is a possibility of a sharp correction. If IPOs are to sail through even under difficult market conditions, the pricing has to be right, he said.

Apart from traditional financial services players, several digital payment and fintech players are also planning to tap the IPO market.

Digital payments major Paytm’s board has approved a proposal to raise over Rs 22,000 crore from IPO, while online insurance platform Policy Bazaar is also looking to float a Rs 4,000-crore offering, industry sources said.

Two small finance banks — Jana SFB and Fincare SFB — have also filed their draft papers with the markets watchdog. While Fincare is planning to mop up Rs 1,330 crore through public offering, Jana is looking to raise around Rs 700 crore.

Aditya Birla Sun Life AMC, the largest non-bank sponsored AMC, is looking to go public with Rs 1,500-2,000 crore offering. With an AUM of Rs 2.7 lakh crore, this is among the top five asset managers and will become the fourth AMC to get traded on the domestic bourses.

From the insurance sector, there are two IPOs – Westbridge Capital and billionaire investor Rakesh Jhunjhunwala-backed Star Health & Allied Insurance, and the largest health benefits administrator Bengaluru-based Medi Assist TPA.

Medi Assist filed IPO papers last month to raise around Rs 840 crore and it will be the first IPO by an insurance TPA (third-party administrator), while Star Health is firming up a Rs 2,000 crore issue.

Private equity firm Blackstone-backed Aadhar Housing Finance and Chennai-based Aptus Housing Finance are also looking to raise Rs 7,500 crore and Rs 3,000 crore respectively through IPOs.

Microfinance players like Arohan Financial Services, Fusion Microfinance and digital debt platform Northern Arc are also looking to hit the IPO market.

The southern Tamil Nadu-based old generation private sector lender Tamilnad Mercantile Bank is also planning a Rs 1,000-crore issue before the end of the calendar year, according to sources.



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