Paytm: analysts divided on the public offer of the Paytm promoter

Mumbai: Paytm promoter One97 Communications’ initial public offering of 18,300 crore will open for subscription on Monday. While analysts are divided on the floorlong-term prospects, some of them recommend signing up for the IPO only for the quotation of earnings. The IPO includes a new issue of shares valued at 8,300 crore and an offer to sell of ₹ 10,000 crore from existing shareholders. The society has set a price range of 2,080-2,150 apiece, which implies a valuation of around ₹ 1.48 lakh crore. Last week, it raised ₹ 8,235 crore from 122 anchor investors. Most of the larger brokers have avoided making stock recommendations.

Yesha Shah, Head of Research, Samco Securities

The company is seeking a $ 20 billion valuation at a price of 49 times the AF21 sales. Considering the current operational matrix, the evaluation appears onerous. Considering the long-term growth outlook, current financial parameters and rich valuations, only risk tolerant investors with a medium to long term horizon should subscribe to the offer.

Jyoti Roy, equity strategist, Angel One

While valuations may seem expensive, Paytm has become synonymous with digital payments via mobile devices and is a market leader in the mobile payments space. Paytm is well positioned to benefit from 5x exponential mobile revenue growth in AF21-26 and the valuations are justified.

Saurabh Joshi, Marwadi’s stock and finance analyst

We assign a rating to avoid on this IPO as valuations are challenging for a losing company. Considering the final 12-month earnings (June 2021) on a post-issue basis, the company will list a market cap with sales of 44.36 times. There are no listed companies in India whose business is comparable to that of the company’s business.

Richa Agarwal, Senior Research Analyst, Equitymaster

In FY21, the year of the pandemic, when digital wallets and mobile payments increased, the company experienced a decline in revenues. Despite a 60% cut in marketing and promotional spending, the losses have continued and the road to profitability is unclear. More money is raised from the offer to sell by existing shareholders than the new issue. While it is very likely to be a successful IPO, from a long-term perspective, it looks more like a speculative bet than a prudent one.


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