Paytm IPO: Subscribers ask IPO Karoo?

Paytm is all set to launch India's biggest IPO of Rs 18,300 crore or $2.4 billion on November 8. It has already garnered $1.1 billion or Rs 8,200 crore from anchor investors ahead of the public issue. Paytm shares, which will be in a price range of Rs 2,080 to Rs 2,150, were on a premium of Rs 150 in the grey market. But what are the risks associated with investing in the fintech startup:

1. Loss-making startup: Paytm, in its DRHP, warned it may not be able to achieve and maintain profitability. Paytm reported losses to the tune of Rs 4,235 crore, Rs 2,943 crore, and Rs 1,704 crore in FY19, FY20, and FY21, respectively.

2. 'Vigorous competition': Paytm competes with domestic and international companies and some of these companies have greater financial resources and substantially larger bases of consumers.

3. Covid-19 Pandemic: Paytm said the ongoing pandemic and measures intended to prevent its spread have had, and may continue to have, material and adverse effects on its business and the results of operations.

4. Lawsuits: One of the cases in which Paytm is involved is its ownership case. A former Paytm director Ashok Kumar Saxena has claimed he co-founded the digital payment platform two decades ago but did not receive shares owed. His complaint filed with the Delhi Police is cited under 'criminal proceedings' in Paytm’s prospectus. Paytm has, however, denied the allegations.

5. Paytm IPO subscribe karoo? Even as the grey market premium is hovering around Rs 130, brokerages are also highlighting risks. Brokerage firm ICICI Securities has laid out extremely competitive markets with continuously evolving technology, failure to attract merchants & volumes can adversely affect business, dependency on payment services for majority of revenue as key risk & concerns.