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One97 Communications Ltd (Paytm)

About the Company

One97 Communications Ltd (Paytm) is India’s leading digital ecosystem for consumers and merchants. They have built the largest payments platform in India based on the number of consumers, number of merchants, number of transactions and revenue as of March 31, 2021. They offer payment services, commerce and cloud services, and financial services to 337mn registered consumers and over 21.8 million registered merchants, as of June 30, 2021. 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.

The company largely caters to Payment Instruments, which allow consumers to use digital wallets, sub-wallets, bank accounts, buy-now-paylater and wealth management services. It also provides third-party instruments such as Debit and Credit Cards and Net Banking. They offer diversified services products such as Paytm Wallet, Paytm QR, Paytm Soundbox, Gold investments and Fixed Deposit, Paytm Postpaid, Merchant Cash Advance and FASTag.

Objects of the Issue

* Growing and strengthening Paytm ecosystem through acquisition and retention of consumers and merchants and providing them with greater access to technology and financial services;

* Investing in new business initiatives, acquisitions and strategic partnerships;

* General corporate purposes;

Valuation

Digital payments have been growing steadily over time however India continues to be a cash-driven economy. In FY21, the digital payments market size by value stood at ~US$ 20Tn with 43Bn transactions during the year. Consumers are rapidly switching to digital payments as it provides simple, safe and convenient ways to transfer money across accounts. Similarly, for merchants, acceptance of payments in digital form has increased significantly due to demonetization, changing trends during COVID-19 like social distancing & government guidelines, etc. and easy mode of payment. Between FY21-FY26, digital payments are expected to more than double and reach USD 40-50Tn by FY26, led by government reforms, improving technology, higher usage of the internet, increasing awareness amongst consumers.

We believe Paytm is well placed with various services such as payments, financials, and cloud which help to bridge between consumers and merchants. The addressable market which the company caters is highly underpenetrated which gives a lot of opportunity for growth. Going forward, they have strong plans to enhance Paytm App’s offerings to consumers as well as deepen merchants’ partnerships and improve technology. Besides, they will 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. On the financial front, the company is in losses and would take time for a revival.

Key Risks:

* i) Financially, the company is into losses.

* ii) Majority of the revenue is earned from single business i.e. payments services.

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SEBI Registration number is INZ000174330

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