Paytm IPO: Jack Ma likely to reap 7x returns in Paytm IPO, Warren Buffett 3x

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NEW DELHI: After the first unicorn landing on Dalal Street, another has intimated of its arrival, and that too with a big bang. Paytm’s parent company One 97 Communications on Friday filed IPO papers with Sebi for its Rs 16,600 crore issue.

The issue, if the size does not change by the time the IPO is launched, will be the biggest ever on Dalal Street. Till now, Rs 15,475 crore IPO of

in 2010 holds that record.

As part of the IPO, the Softbank-backed company will issue fresh shares worth Rs 8,300 crore at a face value of Re 1 each, whereas existing shareholders will offload their stake worth another Rs 8,300 crore.

Among the selling shareholders include investment firms run by Jack Ma, Warren Buffett along with SAIF, SVF Partner, Anfin, Elevation Capital and Vijay Sekhar Sharma, who is the founder of the firm.

In the unofficial market for unlisted shares, Paytm shares are trading at around Rs 2,400 apiece, dealers active in the grey market said. At this price, the company is valued at over $19 billion, or Rs 1,45,423 crore.

Going by market speculation, Paytm is eyeing a valuation of $25-30 billion. If that’s true, then the IPO price could be fixed anywhere between Rs 3,150 and Rs 3,800. And, this will mean a bountiful reward for the pre-IPO investors.

Jack Ma’s Alibaba stands to gain nearly 7 times the average cost of acquisition at Rs 583.40. Warren Buffett’s BH International Holdings stands to take home nearly 3 times returns on investment. Its average cost of acquisition was Rs 1,278.70.

Similarly, other investors will also reap massive gains on their investments. Some early private equity investors like SAIF may take home nearly 250 times their investments. Please note that all these return estimates are based on market speculations, and may not come to fruition.

The company split its shares in a 1:10 ratio in June to result in face value at Rs 1 per share. This increased the total paid-up share capital to 605,930,140. There is buzz that the company may also issue bonus shares, which may then bring down the expected price band of the IPO.

The Noida-based company said it would use the IPO proceeds to strengthen its payment ecosystem and for new business initiatives and acquisitions. As much as 75 per cent of the net offer has been reserved for qualified institutional buyers (QIBs). The company may allocate up to 60 per cent of the QIB portion to anchor investors.

In the grey market, the value of unlisted shares have been on the rise since the buzz of Paytm IPO started. In May, the stock was selling at Rs 950-1,000. That means, if any retail investors bought Paytm shares in May, they may also bag about 4 times returns. However, their shares will be locked in for one year post listing.

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