India-based Paytm preps for planned $3bn IPO

India’s Paytm invited employees to tender equity shares in part or in full for sale in the digital payments giant’s planned initial public offering (IPO), a step it dubs as the country’s largest stock market debut ever.

The startup, formally called One97 Communications Ltd., sent an offer for sale to its staff where it said that its board has approved the offering plans in principle and is finalising the draft red herring prospectus, which could be filed in the first week of July.

The proposed IPO is contemplated to include a fresh issue of equity shares by the company and an offer for sale of equity shares by existing shareholders, Paytm said.

“You may, in your sole discretion, participate in the offer by offering either all or a part of the equity shares held by you… in the offer for sale. We wish to inform you that the offer for sale component has to be finalized before filing the draft red herring prospectus (DRHP) with Sebi. However, the price band for the IPO will be determined at a later stage, either at the time of filing the red herring prospectus (RHP) or prior to the IPO opening for subscription,” the letter said.

If existing shareholders want to sell more in aggregate than allowed during the IPO, the ability to sell stock will be determined on a pro-rata basis, according to the letter. Morgan Stanley is working with Paytm on the offering.

It added, “In light of the above, your equity shares that are not sold in the offer for sale shall be locked in for a period of one year from the date of allotment of equity shares in the IPO, unless they are exempted shares. You will not be able to sell your equity shares during this ‘one year’ lock-in period.”

Paytm warned investors that offering shares does not guarantee they will be sold through the offer, as it will depend on the investor response to the offer. “Accordingly, any of the offered shares which remain unsold in the offer, will be returned to you and will be subject to the lock-in applicable under the Sebi ICDR Regulations,” Paytm said.

The company, whose investors include Berkshire Hathaway Inc., SoftBank Group Corp. and Ant Group Co., is seeking to raise about ₹ 218bn ($3bn) at a valuation of around $25bn to $30bn. Coal India raised more than ₹ 150bn in 2010 in the country’s largest IPO so far.

One97’s, last valued at $16bn, public market debut will include a mix of new and existing shares to meet regulatory obligations in India. The country’s regulations require 10% of shares floated within two years and 25% within five years.

This isn’t the first time Paytm has planned to explore the public route. Around a decade ago, long before Paytm established itself as the largest mobile wallet firm and expanded to several financial and commerce services, the startup had filed with the regulator with intentions to become public. The startup at the time cancelled the IPO plan and instead raised money from VCs to explore new avenues for growth.

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