One97 Communications Limited - IPO Note

Online Payment Service

One97 Communications Limited - IPO Note

Online Payment Service

Price range
Rs. 2080 to 2150
Issue Period:
Nov 08, 2021
Nov 10, 2021
November 09, 2021

Stock Info

CNX Nifty
Face value (Rs.)
Market lot
Issue size
Rs. 18,300 cr.
Public Issue
87,980,769 cr. shares
Market cap post IPO
139,379 cr.
Equity Pre - IPO
61.0 cr.
Equity Post - IPO
64.8 cr.
Issue type
Fresh Issue & OFS

Shareholding (Pre IPO)

Source: Ace equity, StockAxis Research

Shareholding (Post IPO)

Source: Ace equity, StockAxis Research

Key Strengths and Strategies

Paytm leads market in P2M space
Paytm started off as a bill payments and mobile recharge platform in 2010. Over the years, it has created a payments-led ‘super app’ and evolved into a comprehensive payment’s ecosystem, covering payments, credit, insurance, merchants, wealth management, e-commerce services, and so forth. It offers customers a mobile wallet and a UPI platform.

It has built a strong and large customer base of 333m, in-store merchants of 21m, and 87k online merchants. It offers the full service of merchant acquisition solutions, such as QR codes, PoS solutions, and a payment gateway.

It has the largest platform in India, with GMV of INR4,033b reported in FY21. Total GMV has grown at 33% CAGR over FY19–21.

Wide addressable market in India
Paytm has a wide addressable market in India across payment services, commerce and cloud services and financial services. The market segments that they serve have a massive scale and growth, are significantly underpenetrated, and have potential of technology to grow the industry. Their ecosystem allows them to address these multiple large market opportunities at scale and gives them multiple growth vectors.

Paytm provides trusted brand and wide reach
Paytm is available across the country with “Paytm karo” evolving into a verb for hundreds of millions of Indian consumers, shopkeepers, merchants and small businesses. As per the Kantar BrandZ India 2020 Report, the “Paytm” brand is India's most valuable payments brand, with a brand value of US$6.3 billion, and Paytm remains the easiest way to transact across multiple methods with a wide selection of daily life use cases and payment instrument.

Technology enabled products:
Paytm has engineering and technology team of 2,550 members in FY 2021. Their technology is built ground up and integrated across all aspects of their ecosystem which allows them to ensure that they are able to launch products and services quickly, offer integrated and synergistic products, ensure system stability, handle large scale and provide high success rates. Paytm is the only payments company in India that, together with their affiliates, owns each layer of the payment stack. Paytm offer services such as Paytm Wallet, Paytm QR, Paytm Soundbox, Gold investments and Fixed Deposit, Paytm Post-paid, Merchant Cash Advance and FASTag.

Network effect creates advantages for company
The network effect creates sustainable advantages for company as Paytm benefits from self-reinforcing network effects, which leads to low acquisition costs, higher monetization and lifetime value of consumers and merchants, and better economics across their offerings.

Expansion into international markets
There is a large opportunity for Paytm to leverage their technology infrastructure and expand to international markets. In 2017, they piloted their bill payment services in Canada and in 2018, they partnered with Softbank Corp. and Yahoo Japan Corporation to launch PayPay, a leading digital payments and financial services company in Japan. The company continue to explore international opportunities, especially in the developed markets, where they can either launch their merchant services, or collaborate with partners to launch consumer facing platforms.


Revenue dependency from payment services
Paytm derives a majority of its revenue from transaction fees that they collect from merchants for their payment services. In FY19, FY20, FY21, and in Q1FY22, revenue from payment and financial services accounted for 52.5%, 58.1%, 75.3%, 78.0% and 77.4% of its revenue from its operations. Failure to broaden the scope of payments services that are attractive may inhibit the growth of business, as well as increase the vulnerability of core payments business to competitors.

Experienced negative cash flows in prior years
Paytm had negative cash flows from operating activities for FY19, FY20 and FY21, primarily due to operating losses and on account of additional working capital requirement. Any negative cash flows in the future could adversely affect the results of operations and financial condition of the company.

Increase in processing charges can further impact profitability
An increase in payment processing charges to financial institutions or card networks could materially impact profitability as payment processing charges form 40% of the total operating expenses.

Regulatory overhang:
RBI or other government agencies can come out with stringent regulations on amount of fee chargeable to customers or customer acquisition rules both of which may adversely impact the company’s business model

More competition from new players:
There are many fintech players in the market, any new player with better or easier to use features may attract existing or potential new customers. This means acquiring new customers will be critical & may become difficult with more competition

Company is Loss making since inception & is likely to remain in red for some more years in future. Since the growth of company depends on acquiring new customers it is compelled to give promotional discounts etc which eat into its profitability. The company has been loss making since inception & there is no visibility in near future when it will become profitable

Company Description

One 97 Communications Limited (“Paytm”) is India’s leading digital ecosystem for consumers and merchants. They offer payment services, commerce and cloud services, and financial services to 33.7 crore consumers and over 2.18 crore merchants registered with them, as of June 30, 2021.

In 2009, the company launched the first digital mobile payment platform, "Paytm App" to offer cashless payment services to customers and now, it has become India's largest payment platform and the most valuable payments brand. The company have the largest payments platform in India with a GMV of Rs 4,033 billion in FY 2021. It also has an overall mobile payments transaction volume market share of approximately 40% and wallet payments transaction market share of 65% -70% in India as of FY 2021.

Their 2-sided (consumer and merchant) ecosystem enables commerce, and provides access to financial services through their financial institution partners, by leveraging technology to improve the lives of their consumers. The company’s commerce and cloud services offerings provide a lifestyle destination for consumers to avail lifestyle commerce services such as ticketing, travel, entertainment, gaming, food delivery, ride hailing and more. The company’s financial services offerings include mobile banking, lending, insurance, and wealth management for consumers and merchants.


Paytm is India’s leading payments and FinTech enterprise which offers payments, financial services, commerce, and cloud services. It has an overall mobile payments transaction volume market share of approximately 40%, and wallet payments transaction market share of 65% –70% in India as of FY21.  Paytm is the first unicorn of the country and has been a fintech giant. The growth of company will be aided by the recently launched businesses – discount broking, Paytm post-paid, co-branded credit cards, and insurance. Their current contribution to revenue is very small, but going forward, these businesses could be the growth drivers. Along with this, the company through its associate is also in process of buying out a general insurance company.

The market segments that it serves have large growth potential & are significantly under-penetrated. With the help of technology all the segment can be grown substantially. History suggests that in the past when such businesses were listed in other global markets, they have created huge wealth for investors over next few years.

Current issue is priced at a P/BV of 20.67 based on data as on June 30, 2021. We recommend SUBSCRIBE to the IPO for long term perspective.

Key Information

Use of Proceeds:
The total offer stands at Rs. 18300 cr., with a fresh issue of Rs. 8300 cr. as well as offer for sale of Rs. 10,000 cr.

Utilization of proceeds:

  • Growing and strengthening Paytm ecosystem, including through acquisition and retention of consumers and merchants and providing them with greater access to technology and financial services (Rs. 4300 cr.)
  • Investing in new business initiatives, acquisitions and strategic partnerships (Rs. 2000 cr.)
  • General corporate purposes.

Book running lead managers:
Morgan Stanley India Company Pvt Ltd, Goldman Sachs (I) Securities Private Ltd, Axis Capital Ltd, ICICI Securities Ltd, J.P. Morgan India Pvt Ltd, Citigroup Global Markets India Private Ltd and HDFC Bank Ltd

Vijay Shekhar Sharma is the Founder, Managing Director and Chief Executive Officer of the company and the Chairman of the Board. He oversees the Company's key strategic efforts including engineering, design and marketing. Munish Varma is the Non-Executive Director of the company and a nominee of SVF on the company Board. He currently serves as a managing partner at SoftBank Investment Advisers. He was also associated with Deutsche Bank AG.

Financial Statement

Profit & Loss Statement:- (Consolidated)

Particulars (Rs. in Crores) FY19 FY20 FY21
Revenue from Operations 3232.00 3280.80 2802.40
Employee Benefit Expenses 856.20 1119.30 1184.90
Other Expenses 6741.90 4795.90 3384.80
Total operating expenses 7598.10 5915.20 4569.70
EBITDA -4366.10 -2634.40 -1767.30
EBITDA Margin (%) -135.09% -80.30% -63.06%
Depreciation and Amortization 111.60 174.50 178.50
EBIT -4477.70 -2808.90 -1945.80
Other Income 347.70 259.90 384.40
Finance Cost 34.20 48.50 34.80
Profit Before Exceptional Items and Tax -4164.20 -2597.50 -1596.20
Share of restated profit /loss of associates /jv 14.60 -56.00 -74.00
Exceptional Items -82.50 -304.70 -28.10
Profit Before Tax -4232.10 -2958.20 -1698.30
Tax Expenses -6.50 -15.80 2.70
Effective Tax Rate (%) 0.15% 0.53% -0.16%
Profit After Tax -4225.60 -2942.40 -1701.00
PAT Margin (%) -130.74% -89.69% -60.70%