Paytm has finally received approval by way of its parent company One97 Communications to raise Rs 12,000 crore through a fresh issue of shares. The parent company got the approval after the extraordinary general meeting that was held on July 12. This marks the first step in the fintech giant’s move towards one of India’s largest IPOs to ever hit the open market in recent times as per sources. The issue will also host a secondary wherein the existing shareholders will sell their shares. This is estimated to bring in a grand total amount of Rs 16,600 crore.
Parallelly, the CEO of Paytm, Vijay Shekhar Sharma, is set to be declassified as a promoter as he does not own the benchmark 20 per cent stake in the company. He only owns 14.61 per cent. This change was decided upon as the shareholders gave their approval for the move in the meeting. Having said that, Sharma will retain his title as the chairman, CEO and managing director of the company going forward. This move comes in light of the fact that Paytm is also moving to become listed as a professionally managed company (PMC). In order to do so, it needs to abide by the norms set in place by the Securities and Exchange Board of India (SEBI), which states that no single entity can own more than a 25 per cent stake in the company. According to the SEBI guidelines, since Paytm is a Professionally Managed company, no shareholder can have “special rights". This is how companies in this line have to be listed in India going forward.
The company will be filing for an IPO worth $2.3 billion, sometime in November. Paytm will be registering for the IPO with the company holding an approximate valuation of $25 to $ 35 billion. This is a massive increase from the previous 2019 valuation which stood at just $16 billion after it had raised $1 billion from its existing investors at the time, Softbank and Ant Financials. As it stands currently, the key shareholders in the company are the Alibaba and Ant Group, which own a 38 per cent stake, the SoftBank group which owns an 18.73 per cent stake and the Elevation Capital group which owns 17.65 per cent of the company.
With all this underway, the fintech titan will be filing for its Draft Red Herring Prospectus soon with SEBI. The company has already gone ahead and listed the investment banks that will be a part of the public issue. These banks are ICICI Securities, JP Morgan, Axis Capital, Morgan Stanley, Goldman Sachs, Citi and HDFC.
Following the meeting that was held on Monday, the stakeholders also approved the revisions to the Employee Stock Exchange Options Plan (ESOP). These changes are in accordance with the provisions of the stock exchanges as stipulated sources said. In the same meeting, the shareholders approved the new ‘Articles of Association’ of the company as per the required guidelines.
Ahead of this historical IPO, it should also be noted that 11 Chinese nationals were evicted from the board and were replaced by US and Indian nationals, on July 7. Even with this change came no changes to the existing shareholdings in the company. Chinese nationals from Alipay, Ant Financials and Alibaba were replaced on the board.