Paytm's valuation has increased by nearly $40 a share — here’s how

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Paytm's valuation has increased by nearly $40 a share — here’s how
One97 Communication CEO and founder Vijay Shekhar SharmaBCCL/ BI India
  • Mutual funds managed by T Rowe Price has valued Paytm’s shares at $295 apiece at the end of April-June quarter.
  • The increased value of Paytm shares in June quarter coincides with the digital payments giant’s attempt to go public in India.
  • Paytm’s parent company reported a consolidated revenue of ₹3,186.8 crore in FY2021, while cutting down its loss to ₹1,701 crore.
Mutual funds managed by investment management firm T Rowe Price have reportedly valued digital payments firm Paytm’s shares at $295 apiece at the end of April-June quarter. The development comes as Paytm’s parent company One 97 Communications is going for an initial public offering (IPO) this year.

The latest valuation represents a 16% hike from the original share price of $254 apiece, based on the overall $16 billion valuation of the digital payments giants.

T Rowe Price, which invests in publicly listed tech companies like Zoom and Coupang, had made its first investment in Paytm in 2019.

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The investment firm also devalued Paytm shares to $188 apiece in June quarter last year as India was facing COVID-related lockdown and digital payments took a dip.

These shares are valued and devalued on the basis of economic situation, market conditions, company performance, future outlook and more.

The increased value of Paytm shares in the June quarter coincides with the digital payments giant’s attempt to go public in India. One 97 Communications, the parent company of Paytm, filed the preliminary papers for its ₹16,600 crore ($2.2 billion) initial public offering (IPO) in July 2021.

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According to multiple media reports, Paytm is seeking a $25 billion to $30 billion valuation post this public issue.

The Noida-based company reported a consolidated revenue of ₹3,186.8 crore in the fiscal year that ended in March 2021. This was nearly a ₹353 crore reduction from the revenue reported in FY2020.

Paytm also cut its losses to ₹1,701 crore in FY2021, compared to ₹2942 crore reported in FY2020.

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One 97 Communications largely has three monetisation engines running in its digital payments banner Paytm. These are — payments, commerce and cloud services, and financial services.

Paytm's valuation has increased by nearly $40 a share — here’s how
Paytm’s draft prospectus

A company source, on the condition of anonymity, told Business Insider that payments make about 60% of the company’s revenue. It is followed by commerce and cloud that contributes another 25% and financial services makes up about 15%. Paytm earns about ₹1,700-₹1,800 crore from payments, the source added.

The source added that Paytm uses its payments business to onboard more customers, who can eventually be customers for other Paytm’s offerings like commerce or financial services. Financial services has the highest margins for Paytm and it includes lending, insurance and more.
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“For example, if Paytm’s movie business is able to sell movie tickets to 5% of Paytm payments users, or even 3% of users, it will become the largest movies business in India,” the person said, adding that similar trend would be followed in its financial services or commerce verticals.

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