Thread by @niki_poojary

#PAYTM IPO Fiasco

Will cover the following:

•Issue Size 💲
•Business Model
•Shareholding Pattern
•Financials 📊
•Strengths 💪
•Issues ⛳️
•Chart check for traders 📉

Time for a Thread 🧵

• Issue Price: 2150

• Issue Size: Rs. 18300 crs./85,116,279 equity shares

• Fresh issue of Rs.8300 crs. + offer for sale (OFS) of 10000 crs.

• OFS: The proceeds goes to the existing shareholders who are taking an exit & not to the company

• Fresh Issue: Proceeds goes to the company of which Rs. 6300 crs. to be utilized for inorganic growth i.e. acquisitions & balance Rs. 2000 crs. for General corporate purpose

• One 97 Communications Ltd (Paytm) is India’s leading digital ecosystem for consumers and merchants

• It offers payment services, commerce and cloud services, & financial services to 337 mn registered consumers and over 21.8 mn registered merchants, as of June 30, 2021

• Its two sided (consumer and merchant) ecosystem enables commerce, and provides access
to financial services, by leveraging technology

Shareholding Pattern:

• 55% owned by Chinese companies, another 17% by SAIF Partners which is a HK based PE firm. The promoter Vijay Shekhar Sharma just had 15% of holding at IPO date

Financials:

• Despite a 60 % cut in marketing & promotional expenses from FY 2020 to FY 2021, losses still continued

• Past 3 years i.e. since Mar 2019 the sum total losses are to the tune of Rs. 88,743 mn or Rs. 8,874 crs. (funny fact Rs. 8300 crs. is the fresh issue size)

• User transactions are transactions that these users make on the platform plays out in the gross merchandise value (GMV) of all the products and services bought

• Take rate is the % of the GMV that Paytm records as its revenues

• From the above table, its clearly visible that though the no. of users are growing y-o-y the take rate is shrinking from ~2% to just ~0.8% in FY 2021

• Paytm’s focus is to make it a super app by diversifying into Paytm wallet, ticketing services, broking, insurance etc. , while doing nothing meaningful for profitability

In their DRHP they have clearly stated that they may not be able to achieve profitability in future

• In the pre-IPO press con, Vijay Shekhar Sharma said that Paytm is not about quarterly profits but long-term change

• For traders the game is always about QSQT i.e. Quarter Se Quarter Tak, as results season rattles the stock

• However, we understand that the promoters always think for the long term & are not myopic, to focus on quarterly performance, however almost a decade has passed, the company is yet to turn cash positive

• On the debut listing of Paytm, it witnessed a 27.4% fall from the issue price of Rs. 2150

• Lesson to be learnt is to always read the DRHP before applying for an IPO

• Can't justify sky high valuations for a loss making entity in the name of growth

• For traders, the first 3 min candle gave a clear direction

• The smart money was booking out of this issue and might even went short on this stock

• Always go with the big boys

• Reference Sources:

1) aswathdamodaran.blogspot.com/2021/10/the-in…

2) chittorgarh.com/ipo/paytm-ipo/…

3) and few news articles

• Hope you enjoyed reading this thread! 🤠

• Will be posting more such curiosity-inducing threads 🧵