Paytm recently announced raising Rs. 16,600 crore as IPO which will be India’s largest ever. It is expected to launch before November.
What is an IPO?
IPO stands for Initial Public Offering and focuses on the Financial Market. The financial market subdivides into two, namely Money Market and Capital Market. The former is for a short-term market. For example, Commercial Paper, Treasury Bills, certificates of deposit etc. Capital Market is for a long-term perspective which includes Bonds, Stocks, Derivatives, etc. Capital market can also be further divided into two, i.e, Primary market and Secondary market. The primary market is when securities are issued for the very first time, i.e, bonds and stocks are made available to the public. Secondary market comes into the picture when securities are traded among investors who are usually a company’s promoters. Thus, Initial Public Offering (IPO) comes under the Primary market.
When a private company sets off itself to the public by selling stocks for the first time, the process is termed as Initial Public Offering (IPO). The shares can be owned by the general public in exchange for money for the company. If the company decides to sell more of its shares later, it is called Follow-on Public Offering.
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Paytm issued a draft prospectus with the Capital Market’s regulator, Securities, and Exchange Board of India (SEBI). It plans to raise Rs. 16,600 crore which will be the largest Indian Initial Public Offering (IPO). The newly issued share will be worth Rs. 8,300 crore. The existing shares owned by the investors worth Rs. 8,300 crore will also be made available.
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Paytm as a whole is worth $16 Billion. It is the second biggest Indian startup and is founded by Vijay Shekhar Sharma. They have decided to announce the valuation of the company in the range of $24 Billion to $30 Billion which will be around Rs. 2 lakh crores. Out of the Rs. 2 lakh crores, Rs. 16,600 crore will be sold as IPO.
Among the existing investors of Paytm, the top shareholders are mostly Chinese investors. In a way, it is a foreign-owned company. Some major investors are:
- Ant Group: 30.33%
- SoftBank: 18.73%
- Elevation Capital: 17.65%
- Vijay Shekhar Sharma: 14.97%
- Alibaba: 7.32%
- Others: 11%
Coal India raised Rs. 15,475 crore IPO in 2010 which was the largest in India before Paytm’s announcement.
75% of Paytm’s IPO will be reserved for institutional buyers (Mutual Funds etc.). Another 15% will be kept for non-Institutional investors who can invest more than 2 lakh. The rest of the 10% will be reserved for retail investors who can invest small amounts.
Paytm has been a foreign-owned and controlled company. It will stay the same even after the IPO as the maximum shares are still going to be owned by foreign companies.
The company plans to use Rs. 4300 crore for growing and strengthening the ecosystem of Paytm by acquiring or retaining other businesses and providing them with various technologies and financial services.
Paytm has decided to invest Rs. 2000 crore for new businesses. The rest will be reserved for general corporate issues.
Since it is an evolving company, losses are expected in the foreseeable future. Their operating expenses will be increased as they plan to employ more people and expand in India and abroad.
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