Paytm aims to raise $1.6b through fresh issue in IPO

BENGALURU | MUMBAI: One97 Communications, the parent company of Paytm, intends to issue fresh shares worth ₹12,000 crore, or $1.6 billion, in an initial public offering (IPO) slated for later this year.

The company also told shareholders in a note that founder Vijay Shekhar Sharma will no longer be classified as a promoter.

ET has reviewed a copy of the note, which was sent to shareholders on Friday, ahead of its extraordinary general meeting (EGM) next month.

This is the first time that the company has disclosed how much it intends to raise. It was not immediately clear whether the size of the fundraising would increase to $3 billion as was reported earlier.

Paytm did not specifically mention whether existing shareholders would sell their shares.

Sources said Sharma has written to the board about the change in his status as a promoter to comply with rules by capital markets regulator Securities and Exchange Board of India (Sebi).

According to two people aware of the matter, this is a step towards Paytm classifying itself as a ‘professionally managed’ company before a local listing.

May Consider a pre-IPO Funding Round

This would ensure that the company is not seen as fully controlled by the sole founder, along with special rights, they said.

“There are special rights for founders in a startup as its promoter and they typically have control over the company. This change will position it as a more professionally run company where Sharma is one of the shareholders. There could be more additions on the board going forward to reflect the same,” a person aware of the matter said.

Paytm also said it could consider raising a pre-IPO funding round.

“In the event of a pre-IPO placement, the size of the offer would be reduced to the extent of equity shares issued under the pre-IPO placement,” it added.

A spokesperson for Paytm declined to comment.

“The founder’s letter further highlights that the founder currently holds 9,051,624 equity shares of the company amounting to 14.61% of the total paid-up equity share capital…on a fully-diluted basis and can exercise any control over the affairs or the decision-making process of the company only to the extent of his shareholding,” Paytm said in the note.

China’s Ant Group and Alibaba own nearly 38% of One97 Communications, while SoftBank owns 18.73%. Elevation Capital (formerly known as SAIF Partners) has a 17.65% stake.

On June 7, the Noida-based fintech firm wrote to shareholders that it was contemplating a mix of fresh issuance and offer for sale (OFS) for shareholders.

“…is hereby accorded to create, issue, offer and allot such number of Equity Shares, for cash such that the amount being raised pursuant to the fresh issue aggregates up to Rs 12,000 crore (“Fresh Issue”) (with an option to the Company to retain an over-subscription to the extent of 1% of the net offer (defined below) size,” Paytm told shareholders in the note.