Indian payments group Paytm has called a shareholders meeting next month to approve an initial public offering that is being billed as the country’s largest with plans to raise up to $3bn.
The group, which is backed by China’s Ant Group and Japan’s SoftBank, has appointed JPMorgan, Morgan Stanley, Goldman Sachs and India’s ICICI Securities to lead the issue, according to people with knowledge of the company. The offering will target a valuation for Paytm of $29bn.
With operations running from digital payments to banking, Paytm was valued at $16bn in its last funding round in 2019 and has long been a success story for India’s booming technology sector.
But it was dethroned as India’s most valuable start-up this month by edtech company Byju’s.
It is also facing stiff competition in online payments from Western rivals such as Google Pay and PhonePe, a service provided by Walmart’s Indian ecommerce platform Flipkart.
Five years ago “Paytm ruled India, it was in the driver’s seat”, said Neil Shah, an analyst at technology research firm Counterpoint. “But it is still bleeding money.
“This is the right time to do an IPO because the competition is rising fast and that preference for Paytm is declining; the IPO could make the difference for them to compete,” he said.
As a generation of Indian tech start-ups mature, several other unicorns are contemplating listing this year.
Food delivery company Zomato filed its draft prospectus in April seeking to capitalise on a sharp increase in online deliveries in India during the coronavirus pandemic.
Insurance aggregator Policybazaar and beauty ecommerce site Nykaa have also said they are considering listings as is Walmart’s Flipkart.
Under its co-founder and chief executive Vijay Shekhar Sharma, Paytm was one of the first to target digital payments and today has about 150m monthly active users.
But Paytm has struggled to become profitable, even though it has narrowed its losses for two consecutive years.
Last year, Paytm reported a loss of Rs17bn ($230m) compared with Rs29bn the previous year.
“We are seeing many of these start-ups looking at an Indian listing, partly because of global liquidity being high,” said Gokul Rajan, a capital markets lawyer at Cyril Amarchand Mangaldas.
He said many companies also regarded domestic listings, which are regulated by the Securities and Exchange Board of India, as “the most viable option” compared with overseas offerings or special purpose acquisition companies.
“Sebi regulations allow non-profitable companies to IPO, and Indian unicorns are moving a little closer towards the US market with valuations being based on their potential rather than historical results,” he said.
Paytm’s Sharma has been no stranger to controversy over the years. He was embroiled in a blackmail scandal in 2018 after he accused his public relations head of trying to extort $2.7m.
The chief executive has been a fierce critic of the “arbitrary powers and clout” of Silicon Valley firms in India and supported a ban by New Delhi on Chinese apps, even though his biggest investor is Chinese.
He once tweeted that it is “time for the best Indian entrepreneurs to come forward and build the best by Indians, for Indians!”
Additional reporting by Hudson Lockett in Hong Kong