Paytm In M&A Talks With BillDesk, PayU And Infibeam Avenues

SUMMARY

Paytm is exploring this M&A deal around the time when it is also looking at raising about $3 Bn from capital markets through an initial public offering (IPO)

The Vijay Shekhar Sharma-led company is targeting a valuation of $25 Bn – $30 Bn

At least two of the three players that Paytm approached are profitable and that could be one of the attractions for such a deal

IPO-bound fintech unicorn Paytm is in exploratory talks with three payment gateway firms — BillDesk, PayU and BSE-listed Infibeam Avenues — for a possible acquisition, merger or picking up a substantial equity stake in these firms, according to a report.

The Vijay Shekhar Sharma-led digital payments provider is exploring a deal around the time when it is also looking at raising about $3 Bn from capital markets through an initial public offering (IPO), according to a report by ET.

Paytm is targeting a valuation of $25 Bn – $30 Bn, a big jump from its current $16 Bn valuation. Paytm could be the largest IPO debut in India in a 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.

Paytm spokesperson was 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 to ET’s queries.

“Talks are still in its initial stage and right now the conversation is around whether we will be interested in joining forces with Paytm,” a person with direct knowledge of the matter told ET.

Paytm too has a payment gateway, but BillDesk, Infibeam Avenues, PayU and Razorpay are well entrenched in the ecosystem and have specialised businesses. The Indian payment gateway market could continue to grow at 15% year on year to touch $ 100 Bn by 2025, say industry trackers.

At least two of the three players that Paytm approached are profitable and that could be one of the attractions for such a deal, one of the persons indicated.

“Having a payment gateway firm in Paytm portfolio, along with larger transactions and profits could make the whole basket look more attractive before the company goes for listing,” 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 the market and investors that it will continue to lead the market and take bold steps that Vijay Shekhar Sharma is known for.”

Paytm Acquisitions

Founded in 2000 by Vijay Shekar Sharma, One97 Communications started out as a prepaid and mobile recharge platform before Paytm was launched in 2010. Paytm is today one of the biggest digital payments companies in India with its offering spread across digital payments like UPI, credit and debit cards, wealth management through Paytm Money, banking services through Paytm Payments Bank and more. Its past acquisitions have all been towards building a larger app ecosystem.

In 2018, Paytm acquired New-Delhi based Cube26, a tech startup which developed various social engagement applications. Earlier, 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.

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 in line with Paytm’s strategy of becoming more than a digital wallet and expanding the categories in which its digital payments services are being used.

The company has over 350 Mn users overall with 50 Mn monthly active users and 20 Mn+ merchants, according to Bernstein’s primer. Beside this, it has processed over 1.2 Bn monthly transactions across offline and online payments as well as financial services in February 2021.

Expected to file its draft red herring prospectus with the markets regulator Sebi by next month, Paytm 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 new and existing shares to meet regulatory obligations in India, and offer partial exit to some existing backers.