India’s Fintech unicorn IPO-bound Paytm is in M&A talks with three payment gateway firms — PayU, BillDesk, and BSE-listed Infibeam Avenues — for a possible acquisition, merger or picking up a substantial equity stake in these firms.
Vijay Shekhar Sharma led digital payments giant is exploring a deal around the time when it is also looking at raising about $3 Bn from capital markets with an IPO (initial public offering), according to a report by ET.
Paytm is targeting a valuation of $25 Bn – $30 Bn, a gaint leap from its current $16 Bn valuation. This could be the largest IPO debut in India this year in which food aggregator Zomato and used cars marketplace CarTrade, epharmacy startup PharmEasy, beauty eCommerce brand Nykaa and insurtech startup PolicyBazaar are likely to list publicly.
A spokesperson from Paytm quoted as saying, “Paytm or any of its group companies aren’t exploring any deal/arrangement/investment with these players.” PayU and Infibeam refused to comment on the story. BillDesk did not respond.
A person with direct knowledge of the matter said, “Talks are still in its initial stage and right now the conversation is around whether we will be interested in joining forces with Paytm”.
Paytm too has a payment gateway, but PayU, BillDesk, Infibeam Avenues, and Razorpay are well entrenched in the ecosystem and have specialised businesses. The Indian payment gateway market is expected to touch $100 Bn by 2025 and continue to grow at 15% year on year, say industry experts.
At least two among the three players that Paytm approached are profitable and that could be one of the attractions for such a deal. “Having a payment gateway firm in Paytm portfolio, along with larger transactions and profits could make the whole deal look more attractive before the company goes for public with its IPO,” the person said.
According to a person close to the firm, Paytm is looking at a “couple of acquisitions” before it hits the capital markets. “Paytm will have to display to investors and market that it will continue to lead the market and take bold steps that Vijay Shekhar Sharma is known for.”
Vijay Shekar Sharma founded One97 Communications in the year 2000, as a prepaid and mobile recharge platform before Paytm was launched in 2010. Paytm is today one of the largest digital payments companies in India with its offering spread across digital payments like UPI, credit and debit cards, banking services through Paytm Payments Bank, wealth management services through Paytm Money, and more. All its past acquisitions have all been towards building a larger app ecosystem.
In December 2017, Paytm also acquired Bengaluru-based O2O deals platforms Little and Nearbuy, wherein it arranged a merger of the two startups and made a strategic investment in the resultant entity for a majority stake. Later, In 2018, Paytm acquired New-Delhi based Cube26, a tech startup which developed various social engagement applications.
Prior to that, Paytm acquired a majority stake in ticketing platform Insider.in and also invested in MobiQuest’s loyalty platform m’loyal. The acquisitions are part of Paytm’s strategy of becoming more than a digital wallet and expanding the categories in which its digital payments services are being used.
According to Bernstein’s primer, the company has over 350 Mn users, with 50 Mn active monthly users and 20 Mn+ merchants. Beside this, Paytm has processed over 1.2 Bn monthly transactions across offline and online payments as well as financial services in February 2021.
Paytm is expected to file its draft with the markets regulator SEBI by next month, They said in its financial statement that its earnings per share has improved from negative INR -488.13 in FY20 to negative INR -281.69 in FY21. Paytm’s much-anticipated public market debut will include a mix of existing and new shares to meet regulatory obligations in India, and offer partial exit to some existing backers.