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18 Nov, 12 tweets, 3 min read
PayTM's IPO is the biggest ever in India — INR 18,300 Cr!

A huge moment for the Indian startup ecosystem!

But, do you really understand all that's being said?
- What these numbers mean?
- Where the money goes?
- What PayTM's future looks like?

Let's uncover the PayTM IPO 🧵
Structure of the analysis:
1) Understanding the IPO
2) Is PayTM that big? Is it profitable?
3) Is this exciting? What's the future?
4) OK, I'm happy - but, is it worth it?

Thread continues below.

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1/ Understanding the IPO

A) IPO Size: INR 18,300 crore

- Total value of shares being sold to the public

- This is NOT the valuation of the company, which has actually crossed INR 1 lakh crore
B) Where does this money even go?

To the Company
- INR 8,300 Cr for company's future growth
- "New shares" issued by the company

To existing shareholders
- INR 10,000 Cr to existing investors like Ant Group, Softbank, etc. sellingpart of their shares & reducing stake in PayTM
C) Which existing shareholders are selling shares?

Vijay Shekhar Sharma, SoftBank, Ant Group, Alibaba are some prominent investors reducing their holding in PayTM.

Usually large investors don't sell all their shares. It's important to show that they believe in PayTM's growth.
D) How does PayTM ensure that the IPO goes through successfully?

- Hiring an Investment Bank which evaluates demand & prices the shares

- Having "Anchor investors" (huge funds) to commit to a bulk of the amount upfront
2/ Is PayTM that big? Is it profitable?

A) Topline GMV is growing strong

- The absolute topline metric measured by PayTM is its "GMV" or Gross Merchandise Value.

- GMV has almost doubled from INR 2.3 lakh crores in FY 2019 to INR 4.03 lakh crores in FY 2021.
B) Still heavily loss-making

PayTM is NOT profitable. It lost ~INR 4,200 Cr in FY'19, but decreased losses to ~INR 1,700 Cr in FY'21.

C) Are loss-making companies allowed to IPO?

Earlier it wasn't, but SEBI (Securities Exchange Board) made changes to allow doing so now.
3/ Is this exciting? What's the future here?

An IPO is a moment of celebration - most companies fail LONG before they get to this stage.

For India, we see yet another tech startup unicorn list in the country. Not just that it is the biggest IPO India has ever seen!
4/ OK, I'm happy - but, is it worth it?

PayTM is still loss-making and for individual investors, valuing such a company is not straightforward.

However, SEBI changed rules to allow such companies to IPO in India, so that we don't lose them to other countries.

- PayTM continues to show strong top-line growth. But it is a SUPER competitive space.

- Lot of its growth depends on the "financial services" (marketing credit cards, insurances, etc.). These are tricky industries which can be adversely affected by regulations.
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