Paytm Taps Sovereign Wealth Funds as Anchor ahead of IPO

Paytm may be a household name in India across urban and rural centres. But they have a huge challenge on hand and that is to get their Rs.16,600 crore IPO oversubscribed. The size of the issue is too large and the stakes are too high, so obviously Paytm is plugging all the missing links to ensure a smooth IPO process.

While Paytm has filed for its Rs.16,600 crore IPO, the SEBI approval is yet to come in. The Paytm IPO will consist of Rs.8,300 crore of fresh issue and another Rs.8,300 crore by way of offer for sale or OFS. At Rs.16,600 crore, Paytm will be the largest IPO in Indian history, beating the Rs.15,000 crore raised by Coal India in 2010. The IPO would be smaller than LIC.

Check - LIC to File for its IPO in November 2021

Currently, Paytm is in talks with marquee SWF investors like the Abu Dhabi Investment Authority (ADIA), GIC of Singapore, Canadian Pension Fund etc. Even before the anchor placement, Paytm may look at a sizable pre-IPO placement of around Rs.2,000 crore. The eventual IPO size will be reduced to the extent of pre-IPO placement.

In addition, Paytm has also been tapping into some large institutional investors like Nomura of Japan and Blackrock of the US for participating in the Paytm pre-IPO placement as well as the anchor placement. Considering the size of the issue, Paytm may look at institutional participation to a much larger extent to see the issue through comfortably.

The big difference between a pre-IPO placement and an anchor investment is that the anchor investment has a lock-in period of just 30 days. Also, in the case of the anchor investor, there is no price discount and it is at the same rate as the IPO. As per extant rules, the anchor investor can be offered up to 60% of the institutional quote for the IPO.

The eventual pricing would depend on the valuation arrived at, although informal estimates peg the valuation of Paytm at between $22 billion and $25 billion at the time of the IPO. Paytm is owned by One-97 Communications.

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