Home / Markets / Ipo /  CPPIB doubles down on  Paytm  IPO;  overall subscription at 48%

CPPIB doubles down on  Paytm  IPO;  overall subscription at 48%

A QR code for Paytm is pictured at a groceries store. Overall, the IPO received a 48% subscription on the second day, improving from just 18% on Monday (Photo: AFP)Premium
A QR code for Paytm is pictured at a groceries store. Overall, the IPO received a 48% subscription on the second day, improving from just 18% on Monday (Photo: AFP)

  • Overall, the IPO witnessed a subscription of 48% on the second day. It was subscribed just 18% on Monday
  • The portion of the share sale reserved for institutional investors was subscribed 46%, while the high net-worth individual book subscription stood at just 5%

MUMBAI : A mega bid by Canadian pension fund CPPIB and robust retail demand were the rare bright spots in Paytm’s public issue that struggled to achieve subscriptions of half the shares on offer on the second day.

The 18,300 crore initial public offering (IPO) of One97 Communications Ltd, which runs Paytm, saw only the retail portion getting oversubscribed. The retail book, worth around 1,830 crore, was subscribed 1.23 times at the end of Tuesday, according to stock exchange data.

The portion reserved for institutional investors was subscribed 46%, while that of high net worth individuals received only 5% subscription.

Overall, the IPO received a 48% subscription on the second day, improving from just 18% on Monday. The issue will close on Wednesday.

CPPIB, meanwhile, doubled down on its bet on the Noida-based company, with a bid of around 1,280 crore, a person aware of the matter said.

The fund had also taken part in the IPO’s anchor book allotment a day before the issue opened to broader investors.

Spokespersons for CPPIB and Paytm could not be reached immediately for comment.

Paytm has priced its shares in the range of 2,080-2,150 apiece, valuing the company at 1.39 trillion at the upper end of the price band.

The IPO comprises a fresh issue of 8,300 crore and an offer for sale of up to 10,000 crore.

The offer for sale or secondary share sale consists of the sale of shares worth up to 402.65 by Paytm founder Vijay Shekhar Sharma; up to 4,704.43 crore by Antfin (Netherlands) Holdings; up to 784.82 crore by Alibaba.com Singapore E-Commerce; up to 75.02 crore by Elevation CapitalV FII Holdings; up to 64.01 crore by Elevation Capital V Ltd; 1,327.65 crore by Saif III Mauritius; 563.63 crore by Saif Partners; 1,689.03 crore by SVF Partners; and 301.77 crore by International Holdings.

Analysts gave a mixed response to the IPO, terming it a good bet to ride India’s fintech wave while also cautioning about expensive valuations.

Analysts at Canara Bank Securities Ltd said Paytm had shown substantial growth in user base and gross merchandise value (GMV) since its inception in the fintech sector.

“Moreover, the business is scalable due to the high convenience of digital banking. However, the valuation appears to be expensive at P/B ratio (price-to-book ratio) of 49.74x for FY21," the analysts wrote in a note.

Paytm recorded negative cash flows from operating activities for FY19, FY20 and FY21, primarily due to operating losses and additional working capital needs.

“The IPO is valued at 43.7x FY21 price-to-sales and 36.7x FY22 annualized price-to-sales, which is at a discount of ~12% to the recently listed unicorn, Zomato. While there is no listed peer available for Paytm in the domestic market, we believe high valuations for unicorns like Paytm that has created significant scale and brand equity, are likely to sustain," Vikas Jain, senior research analyst at Reliance Securities, said in a report, justifying the IPO pricing.

Jain also said that a 33% compound annual growth rate in GMV over FY19-FY21, despite the pandemic, “vindicates Paytm’s leadership and brand value."

ABOUT THE AUTHOR

Swaraj Singh Dhanjal

" Based in Mumbai, Swaraj Singh Dhanjal is responsible for Mint’s corporate news coverage. For the past eight years he has been writing on the biggest deals in private equity, venture capital, IPO market and corporate mergers and acquisitions. An engineer and an MBA, he started his journalism career in 2014 with Mint. "
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