Paytm makes offer for sale ahead of planned IPO; AGM on June 30

In an internal email to employees on Monday, IPO-bound digital payments firm Paytm has asked if they would like to sell their shares.

In the communication, Paytm has explained it will be filing its Draft Red Herring Prospectus with the Securities and Exchange Board of India (Sebi) soon, and told shareholders, "You may, in your sole discretion, participate in the Offer by offering either all or a part of the Equity Shares held by you (which are eligible to be offered in the Offer) in the Offer for Sale. We wish to inform you that the Offer for Sale component has to be finalised before filing the DRHP with SEBI," the firm said.

The board of One97 Communications Ltd, which owns Paytm, has given an in-principle approval to the offering plan. A formal approval for this is expected once the prospectus is finalised.  Morgan Stanley is steering the offering process on behalf of One97 Communications.

The firm’s annual general meeting is scheduled for June 30.

Employees will sell their shares as a part of the IPO and have choice of selling either a part or their entire stake. Shares which they do not sell during the IPO will be subject to a one year lock in condition.

If existing shareholders want to sell more in aggregate than allowed during the IPO, the ability to sell stock will be determined on a pro-rata basis, according to the documents.

India’s listing rules require companies float 10 per cent of shares within 2 years and 25 per cent within 5 years.

The other investors of One97 communications include Softbank, Berkshire Hathaway, and the Ant Group.

Paytm’s IPO is expected to be the biggest ever in India, at a valuation of $30 billion.

Unlike many of its peers, Paytm has started to expand its merchant payment ecosystem. It has realized that though it can always try to take maximum share of the Unified Payment Interface (UPI) transactions, from a revenue generation point it will not have any impact.

The firm has an installed user base of about 350 million, 50 million active users, and over 20 million merchant users, while its payments bank has about 60 million accounts.

Paytm's realignment of its position from being a mere payments service provider to merchant payments, with its credit tech vertical leading the next wave of growth its payments bank leading to lending-based monetisation and its talent pool were among the highlights in a recent pre-IPO Bernstein report.