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Digital ecosystem offering inclusive access to financial services

One 97 communications (Paytm) is India’s leading digital ecosystem for consumers and merchants. It is the largest payments platform in India, with a GMV of ~| 4 lakh crore in FY21

* It offers consumers & merchants, technology-led, easy-to-use digital product and services as well as easy and inclusive access to financial service

* As of June 30, 2021, it offers payment services, commerce & cloud services, and financial services to 33.7 crore consumers & over 2.2 crore merchants

Key triggers/Highlights:

* Paytm's network effect creates sustainable advantages through costeffective acquisition of consumers & merchants; reinforce the platform by building higher engagement & stickiness with consumers and merchants; build high-monetisation products at low cost of acquisition

* Paytm brand is India's most valuable payments brand, with value of US$6.3 billion and remains the easiest way to transact across multiple methods.

* Paytm focuses on consumers and merchants who have limited access to financial services products, have a massive scale, are significantly underpenetrated, and have huge growth potential

* A key strategic focus is to scale up its consumer & merchant lending businesses, including Paytm Postpaid and wealth management offerings

* Paytm plans to continue to expand the merchant network across cities and towns in India while deepening partnerships with existing merchants

What should investors do? One 97 Communication (Paytm) is play on digitisation of various financial services including payments, investments & financial solutions. At upper end of price band, the company is valued at ~9.5x post issue BV and at 24% of annualised GMV.

* We assign UNRATED rating to the IPO.

Key risk & concerns

* Extremely competitive markets with continuously evolving technology

* Failure to attract merchants & volumes can adversely affect business

* Dependency on payment services for majority of revenue

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