Unlisted Paytm Shares Trading At 100% Premium To ESOP Share Price

SUMMARY

Before the IPO announcement in June, Paytm’s unlisted shares were trading at around INR 11,000 - INR 12,000 per share, at a premium of 10-12% to the average share price of ESOPs in FY21

Unlisted shares in the grey market shot up to INR 23,000-24,000 in June after the fintech's IPO plans were announced

These shares in the grey market have now been split into 1:10 in anticipation of a similar dilution by Paytm through a bonus issue ahead of its IPO

Paytm’s draft IPO prospectus revealed that the weighted average share price of ESOPs during the year ended March 31, 2021 was INR 10,706.93 per share — whereas its unlisted shares in the grey market were trading at more than 100% that price in June when the IPO plans became clear, according to several share brokers in the grey market.

“That pricing premium has remained intact. However, these shares have now been split into 1:10 in anticipation of a similar dilution by Paytm through a bonus issue ahead of its IPO. That is why the unlisted shares in the grey market are now trading at around INR 2,300-2,400,” said Dinesh Gupta of Unlisted Zone, a platform for trading in unlisted shares.

Before the IPO announcement in June, Paytm’s unlisted shares were trading at around INR 11,000 – INR 12,000 per share, at a premium of 10-12% to the average share price of ESOPs in FY21.

“I think the unlisted shares of Paytm are trading at a premium and will stay range-bound under INR 2,500 in lead up to the IPO. Currently, the selling price point is around INR 2,300 and buying price point is around INR 2,400,” said Sandeep Ginoda of Abhishek Securities, a consultant for unlisted shares.

All the major shareholders of Paytm, including founder and CEO Vijay Shekhar Sharma, Ant Financial, Alibaba, Berkshire Hathaway, Elevation Capital (through the earlier funds of its erstwhile avatar of SAIF Partners), will sell portions of their stakes in the fintech behemoth in the company’s upcoming public listing.

According to Paytm’s draft red herring prospectus (DRHP) filed with capital markets regulator SEBI on Friday (July 16), the company intends to offer shares worth INR 16,600 Cr in the initial public offering (IPO). While INR 8,300 Cr or half of this will be accounted for by a fresh issue of shares, existing shareholders will sell the same amount of shares in the IPO. The DRHP also says that the size of the issue may be reduced if Paytm raises INR 2,000 Cr in a pre-IPO round as being planned by the company.

Interestingly, Paytm is planning to list as a professionally managed company rather than as one managed by promoters, according to media reports. This means that Ant Financial, which has a 29.6% shareholding in the company will have to sell at least 4.6% of its stake. Ant is a part of the Jack Ma-led Alibaba Group which also owns additional 7.2% stake in paytm through one of its ecommerce arms.

The other major shareholders in the company are SoftBank which owns 19.6% through its two funds; Elevation Capital (formerly SAIF Partners) which owns 17.2%; Vijay Shekhar Sharma and and his namesake VSS Holding Trust have 9.6% and 5% stakes, respectively; and Warren Buffet’s Berkshire Hathaway owns 2.8%.