Paytm shares trade with huge premium in unlisted market

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Paytm’s parent firm One97 Communications has received market regulator Securities and Exchange Board of India‘s (SEBI) clearance to raise funds via its initial public offering (IPO). The fintech platform Paytm plans to raise ₹8,300 crore through fresh issue of equity shares and another ₹8,300 crore through the offer for sale (OFS) route.

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Paytm’s IPO worth ₹16,600 crore will make it India’s biggest public issue so far, topping Coal India Ltd’s ₹15,000 crore public issue in 2010. Paytm’s founder, MD and CEO Vijay Shekhar Sharma and Alibaba group firms will dilute some of their stake in the proposed offer-for-sale.

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As per market observers, Paytm is trading at ₹3300-3400 levels in unlisted market, after the news of receiving go ahead from SEBI for its much-anticipated IPO. Earlier it was traded at around ₹3400-3500 levels.

“Paytm is trading at very crucial levels, if the IPO issue price comes lower than current unlisted prices which looks possible, we may see a correction in Unlisted prices of Paytm. As rates are on higher side in unlisted market, volumes have dried up,” said said Abhay Doshi, founder, UnlistedArena.com.

Paytm shares have been traded from more than 3 years in unlisted space. “Irrespective of price band unlisted market works on it own calculations, rumors and company performance. Last there were media reports that Paytm may eye 25-30 bn $ valuation on listing. So, as if now unlisted market is considering the same valuation,” added Doshi.

The company plans to use part of IPO proceeds to grow its existing business lines and acquire new merchants and customers. Paytm has over 20 million merchant partners in its network. Its users make 1.4 billion monthly transactions, according to numbers in a recent company blog post, as reported by Bloomberg.

For the year ended 31 March, Paytm’s losses narrowed to ₹1,701 crore. However, under the risk factors of its draft documents, Paytm stated that it has incurred losses for three consecutive years and does not expect to be profitable in the foreseeable future.

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