Paytm to raise Rs 12,000 cr via fresh equity, remove Sharma's promoter tag

The company's much-awaited IPO is expected to come by November this year

One97 Communications, the parent company of digital payments platform Paytm, intends to raise Rs 12,000 crore ($1.6 billion) in fresh equity through its much-awaited initial public offering (IPO), which is expected by November this year.

“...the amount being raised pursuant to the fresh issue aggregates up to Rs 12,000 crore with an option to the Company to retain an over-subscription to the extent of 1% of the net Offer (defined below) size, or such other extent as may be permitted under the Applicable Laws..,” the company said in a notice for an extraordinary general meeting  (EGM) of shareholders to be held on July 12, a copy of which has been seen by Business Standard.

The EGM will also resolve to consider and approve the declassification of Vijay Shekhar Sharma from his status as a promoter of the company. The notice states: “…the shareholders of the Company hereby take on record that Mr Vijay Shekhar Sharma shall henceforth not be identified as a ‘promoter’ of the Company for any purpose, regulatory, statutory, commercial or otherwise, under any applicable law”. 

“Paytm is a professionally managed company. As per the Securities and Exchange Board of India rules, no single shareholder can have control by virtue of being a founder. There are no agreements that confer such control over the company to the founder or anyone else. That is just how listed companies need to be in India,” said a source.

This is Paytm’s primary fundraise, and sources say that it will be followed by a secondary fundraise. According to media reports, Paytm is looking to raise a total of $3 billion (Rs 22,000 crore). 

The digital payments company is backed by investors like SoftBank Group (19.63 per cent), Alibaba's Ant Group (29.71 per cent) and Saif Partners (18.56 per cent). Sharma holds about 14.61 per cent equity in the company.

Paytm has roped in marquee bankers to run its IPO. Some of the names doing rounds include, JP Morgan, Morgan Stanley and ICICI Securities. 

In an internal email on June 7, Paytm asked employees if they would like to sell their shares in the company’s IPO.  Employees will sell their shares as a part of the IPO and can sell either a part or their entire stake. Shares not sold during the IPO will be subject to a one-year lock-in. 

Paytm’s IPO plan received in-principle approval from its Board in May. If successful, this could be the biggest IPO by an Indian company, breaking Coal India’s 2010 record of  Rs 15,475 crore.

Paytm is also targeting a valuation of $25 billion to $30 billion — 1.5-1.8 times its current valuation of $16 billion. 

A recent report by Bernstein Research says that Paytm is not just a financial app provider but a group of synergistic fintech platforms.  

The Paytm ecosystem covers payments (wallet/UPI), merchant acquiring, credit saving, asset management, insurance and broking services to complement its e-commerce/e-ticketing platforms. “Paytm has over 350 million installed base, 50 million active user base, and over 20 million merchant base. Around 100 million of those users are KYC compliant. Paytm’s non-payment businesses are scaling rapidly. It is aggressively working to monetise across multiple verticals to break-even in 12-18 months,” the report said.