IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Equity Capital Markets

<div>
<p><a href="https://www.smartkarma.com/entities/paytm-mobile-solutions-pvt-ltd" target="_blank" data-smartkarma-citation="entities:26149:1" rel="noopener">Paytm (PAYTM IN)</a>, formally known as One97 Communications, is India’s largest payments platform based on the number of consumers, number of merchants, number of transactions and revenue as of 31 March 2021, according to RedSeer. Paytm has an overall payments transaction volume market share of 40%, and wallet payments transaction market share of 65-70% in India as of FY21, according to RedSeer. Paytm’s shareholders include <a href="https://www.smartkarma.com/entities/ant-group-co-ltd" target="_blank" data-smartkarma-citation="entities:24240:1" rel="noopener">Ant Financial Services Group (6688 HK)</a> (29.6% of outstanding shares), Softbank Vision Fund (18.3%), <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:787:1" rel="noopener">Alibaba Group (BABA US)</a> (7.2%) and <a href="https://www.smartkarma.com/entities/berkshire-hathaway-inc-cl-b" target="_blank" data-smartkarma-citation="entities:8635:1" rel="noopener">Berkshire Hathaway Inc Cl B (BRK/B US)</a> (2.8%).  </p>
<p>Paytm is in talks with firms such as Abu Dhabi Investment Authority, GIC, Blackrock and Noumra to become anchor investors in its upcoming IPO, according to press reports. Paytm is also seeking to raise up to Rs166.0 billion ($2.2 billion) at a $20-22 billion valuation, according to press reports. </p>
</div><div><div>
<p>In <a href="https://www.smartkarma.com/insights/paytm-ipo-initiation-a-payments-led-super-app" target="_blank" data-smartkarma-citation="insights:54983" rel="noopener">Paytm IPO Initiation: A Payments-Led Super-App</a>, we opined that as India’s largest payments platform, Paytm is well placed to benefit from this structural tailwind. The advent of UPI has increased competition (Google Pay, PhonePe, <a href="https://www.smartkarma.com/entities/one-mobikwik-systems-ltd" target="_blank" data-smartkarma-citation="entities:33952:1" rel="noopener">One Mobikwik Systems (1235487D IN)</a>) but Paytm is also leveraging its dominance in digital payments to build a synergistic ecosystem of complementary services, resulting in a strong claim to the “super-app” tag. While the COVID-19 pandemic was disruptive particularly to the non-payments business, Paytm should return to growth as the impact of the pandemic wanes and vaccination rates rise in India. We concluded that Paytm's fundamentals are attractive. </p>
<div class="content-highlight"><p>In this note, we take a first look at Paytm's valuation. Overall, based on our valuation analysis, we think that the rumoured IPO valuation can be justified.</p></div>
</div></div>


Paytm (PAYTM IN), formally known as One97 Communications, is India’s largest payments platform based on the number of consumers, number of merchants, number of transactions and revenue as of 31 March 2021, according to RedSeer. Paytm has an overall payments transaction volume market share of 40%, and wallet payments transaction market share of 65-70% in India as of FY21, according to RedSeer. Paytm’s shareholders include Ant Financial Services Group (6688 HK) (29.6% of outstanding shares), Softbank Vision Fund (18.3%), Alibaba Group (BABA US) (7.2%) and Berkshire Hathaway Inc Cl B (BRK/B US) (2.8%).  
Paytm is in talks with firms such as Abu Dhabi Investment Authority, GIC, Blackrock and Noumra to become anchor investors in its upcoming IPO, according to press reports. Paytm is also seeking to raise up to Rs166.0 billion ($2.2 billion) at a $20-22 billion valuation, according to press reports. 

In Paytm IPO Initiation: A Payments-Led Super-App, we opined that as India’s largest payments platform, Paytm is well placed to benefit from this structural tailwind. The advent of UPI has increased competition (Google Pay, PhonePe, One Mobikwik Systems (1235487D IN)) but Paytm is also leveraging its dominance in digital payments to build a synergistic ecosystem of complementary services, resulting in a strong claim to the “super-app” tag. While the COVID-19 pandemic was disruptive particularly to the non-payments business, Paytm should return to growth as the impact of the pandemic wanes and vaccination rates rise in India. We concluded that Paytm's fundamentals are attractive. 
In this note, we take a first look at Paytm's valuation. Overall, based on our valuation analysis, we think that the rumoured IPO valuation can be justified.


<p><a href="https://www.smartkarma.com/entities/paytm-mobile-solutions-pvt-ltd" target="_blank" data-smartkarma-citation="entities:26149:1" rel="noopener">Paytm (PAYTM IN)</a>, formally known as One97 Communications, is India’s largest payments platform based on the number of consumers, number of merchants, number of transactions and revenue as of 31 March 2021, according to RedSeer. Paytm has an overall payments transaction volume market share of 40%, and wallet payments transaction market share of 65-70% in India as of FY21, according to RedSeer. Paytm’s shareholders include <a href="https://www.smartkarma.com/entities/ant-group-co-ltd" target="_blank" data-smartkarma-citation="entities:24240:1" rel="noopener">Ant Financial Services Group (6688 HK)</a> (29.6% of outstanding shares), Softbank Vision Fund (18.3%), <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:787:1" rel="noopener">Alibaba Group (BABA US)</a> (7.2%) and <a href="https://www.smartkarma.com/entities/berkshire-hathaway-inc-cl-b" target="_blank" data-smartkarma-citation="entities:8635:1" rel="noopener">Berkshire Hathaway Inc Cl B (BRK/B US)</a> (2.8%).  </p><p>Paytm plans to raise up to Rs166.0 billion ($2.2 billion) with a primary/secondary split of 50%/50%, according to the DHRP filing. </p><p>The Indian Government is highly supportive of digital payments and in 2016, introduced demonetisation efforts through the launch of Unified Payment Interface (UPI) to reduce the reliance on cash. However, India continues to be a cash-driven economy which underscores the opportunity. Due to government initiatives, improving technology, growing awareness, digital payments by value in India are expected to more than double from $20 trillion in FY21 to $40-50 trillion by FY26, according to RedSeer. </p><div class="content-highlight"><p>As India’s largest payments platform, Paytm is well placed to benefit from this structural tailwind. The advent of UPI has increased competition (Google Pay, PhonePe, MobiKwik) but Paytm is also leveraging its dominance in digital payments to build a synergistic ecosystem of complementary services, resulting in a strong claim to the “super-app” tag. While the COVID-19 pandemic was disruptive particularly to the non-payments business, Paytm should return to growth as the impact of the pandemic wanes and vaccination rates rise in India. Overall, we think that Paytm's fundamentals are attractive. </p></div>

Paytm (PAYTM IN), formally known as One97 Communications, is India’s largest payments platform based on the number of consumers, number of merchants, number of transactions and revenue as of 31 March 2021, according to RedSeer. Paytm has an overall payments transaction volume market share of 40%, and wallet payments transaction market share of 65-70% in India as of FY21, according to RedSeer. Paytm’s shareholders include Ant Financial Services Group (6688 HK) (29.6% of outstanding shares), Softbank Vision Fund (18.3%), Alibaba Group (BABA US) (7.2%) and Berkshire Hathaway Inc Cl B (BRK/B US) (2.8%).  Paytm plans to raise up to Rs166.0 billion ($2.2 billion) with a primary/secondary split of 50%/50%, according to the DHRP filing. The Indian Government is highly supportive of digital payments and in 2016, introduced demonetisation efforts through the launch of Unified Payment Interface (UPI) to reduce the reliance on cash. However, India continues to be a cash-driven economy which underscores the opportunity. Due to government initiatives, improving technology, growing awareness, digital payments by value in India are expected to more than double from $20 trillion in FY21 to $40-50 trillion by FY26, according to RedSeer. As India’s largest payments platform, Paytm is well placed to benefit from this structural tailwind. The advent of UPI has increased competition (Google Pay, PhonePe, MobiKwik) but Paytm is also leveraging its dominance in digital payments to build a synergistic ecosystem of complementary services, resulting in a strong claim to the “super-app” tag. While the COVID-19 pandemic was disruptive particularly to the non-payments business, Paytm should return to growth as the impact of the pandemic wanes and vaccination rates rise in India. Overall, we think that Paytm's fundamentals are attractive. 

Paytm IPO Initiation: A Payments-Led Super-App

Financials & FinTech research, Galliano’s Financials Research

Victor Galliano

Financials & FinTech research

Financials & FinTech, EM & Developed Markets

Galliano’s Financials Research

Galliano's Financials Research provides fundamental research in Emerging Markets financials, including FinTech, as well as financials in select Developed Markets.

The investment style applied is generally value oriented, although Growth At Reasonable Price (GARP) strategies can also be used where appropriate. 

Our investment research approach aim is often contrarian, looking to capitalise on overly sceptical or optimistic consensus views. In terms of valuation techniques, the focus is on PBV ratio to ROE, PE multiples and dividend yield, as well as the application of PEG ratios and, where appropriate, Sum of the Parts (SOTP) valuations.

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/nexi-spa" target="_blank" data-smartkarma-citation="entities:28921:1" rel="noopener">Nexi SpA (NEXI IM)</a>’s offer for Nets makes it a leading player in the European payments, broadening and deepening its footprint in Europe ex-Italy, including the Nordics and Eastern Europe</li>
<li>Its key growth drivers are increased scale, in a largely fixed cost business, and the potential for synergies</li>
<li>Also the pandemic-driven switch from cash to digital payments throughout Europe adds to the growth prospects</li>
<li>Looking at past acquisitions in the sector, the price paid for Nets is no bargain, but there is clear potential for premium EBITDA margin improvements, from synergies and greater scale</li>
<li>In addition, in this all paper deal for Nets there are lock-up periods for core shareholders ranging from 6 to 24 months</li>
<li>We estimate that the merged Nexi-SIA-Nets trades on EV/EBITDA multiples of 20.9x for 2020E, 19.3x for 2021E and 17.5x for 2022E, and that our EBITDA estimates are conservative</li>
<li>Risks to our view include increased pricing competition from core payments competitors, as well as new entrants, along with potential regulatory constraints being placed on the SIA deal, following the announcement of the Nets acquisition</li>
</ul>



Nexi SpA (NEXI IM)’s offer for Nets makes it a leading player in the European payments, broadening and deepening its footprint in Europe ex-Italy, including the Nordics and Eastern Europe
Its key growth drivers are increased scale, in a largely fixed cost business, and the potential for synergies
Also the pandemic-driven switch from cash to digital payments throughout Europe adds to the growth prospects
Looking at past acquisitions in the sector, the price paid for Nets is no bargain, but there is clear potential for premium EBITDA margin improvements, from synergies and greater scale
In addition, in this all paper deal for Nets there are lock-up periods for core shareholders ranging from 6 to 24 months
We estimate that the merged Nexi-SIA-Nets trades on EV/EBITDA multiples of 20.9x for 2020E, 19.3x for 2021E and 17.5x for 2022E, and that our EBITDA estimates are conservative
Risks to our view include increased pricing competition from core payments competitors, as well as new entrants, along with potential regulatory constraints being placed on the SIA deal, following the announcement of the Nets acquisition


Nexi’s (NEXI IM) Offer for Nets; From National to European Payments Champion

European Event-Driven Analyst

Patryk Basiewicz

PGB Research

<p>On 15 November, Nexi SpA (NEXI IM) , the leading Payment company (PaymentCo) in Italy reached an agreement to purchase Nets, a European peer, who has roots in the Nordics but recently has expanded into Central, Eastern and Southern Europe. It is an all-share deal, but with Nexi assuming EUR1.8bn of Nets' debt.</p><p>The headline value of Nets is EUR7.8bn, but with an earnout component of EUR250, the headline value is closer to EUR8bn. This why, below, my deal multiple is at 21.1x, based on 2020E numbers, is somewhat larger than the ~20x that Nexi claims it the deal multiple. Note Nets went private at 19x EV LTM / EBITDA in 2018. </p><p>Below I analyse the valuation implications for Nexi from this move.</p>

On 15 November, Nexi SpA (NEXI IM) , the leading Payment company (PaymentCo) in Italy reached an agreement to purchase Nets, a European peer, who has roots in the Nordics but recently has expanded into Central, Eastern and Southern Europe. It is an all-share deal, but with Nexi assuming EUR1.8bn of Nets' debt.The headline value of Nets is EUR7.8bn, but with an earnout component of EUR250, the headline value is closer to EUR8bn. This why, below, my deal multiple is at 21.1x, based on 2020E numbers, is somewhat larger than the ~20x that Nexi claims it the deal multiple. Note Nets went private at 19x EV LTM / EBITDA in 2018. Below I analyse the valuation implications for Nexi from this move.

Nexi SpA (NEXI IM): The Nets Purchase Is a Good Deal... I See a Rerate in Short and Longer Term

<ul>
<li>
<a href="https://www.smartkarma.com/entities/ant-financial-services-group" target="_blank" data-smartkarma-citation="entities:24240:1" rel="noopener">Ant Group (6688 HK)</a> has priced above the initial market capitalisation range of USD200 to USD300bn, at USD317bn including its over-allotment option of shares</li>
<li>Ant’s IPO valuation reflects the assumptions in our ambitious scenario SOTP valuation</li>
<li>Based on earnings and EBITDA multiples, Ant Group looks attractive relative to payments companies and fast growth investment and wealth managers</li>
<li>Ant is at a slight discount to the China MegaTech comparables, and we believe that it warrants a premium valuation to its China peers</li>
<li>Ant’s premium growth potential in digital finance, leveraging off its leading digital payments footprint, indicates further upside potential to the shares post IPO, in our view</li>
<li>Risks to our positive view on Ant Group include increased regulatory restrictions in China, heightened geopolitical tensions impacting demand for the shares at IPO and weaker than expected GDP growth limiting growth potential, especially in China</li>
</ul>



Ant Group (6688 HK) has priced above the initial market capitalisation range of USD200 to USD300bn, at USD317bn including its over-allotment option of shares
Ant’s IPO valuation reflects the assumptions in our ambitious scenario SOTP valuation
Based on earnings and EBITDA multiples, Ant Group looks attractive relative to payments companies and fast growth investment and wealth managers
Ant is at a slight discount to the China MegaTech comparables, and we believe that it warrants a premium valuation to its China peers
Ant’s premium growth potential in digital finance, leveraging off its leading digital payments footprint, indicates further upside potential to the shares post IPO, in our view
Risks to our positive view on Ant Group include increased regulatory restrictions in China, heightened geopolitical tensions impacting demand for the shares at IPO and weaker than expected GDP growth limiting growth potential, especially in China


Ant Group (6688 HK): IPO Pricing Warrants a Re-Rating

Italy

Nexi is a European paytech company that offers digital payment services and infrastructure for banks, companies, institutions, and public administrations. It provides payment acceptance solutions, including credit, debit, and prepaid cards, along with services like payment and security, corporate banking, and POS solutions. The company is headquartered in Milan, Italy, and was founded in 1939.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Nexi (NEXI IM)

Paytm IPO: Valuation First Look

Paytm is seeking to raise up to $2.2 billion at a $20-22 billion valuation. Overall, based on our valuation analysis, we think that the rumoured...

Arun George

Paytm IPO Initiation: A Payments-Led Super-App

Paytm plans to raise up to Rs166.0 billion ($2.2 billion) with a primary/secondary split of 50%/50%, according to the DHRP filing. Overall, we...

Arun George

Nexi’s (NEXI IM) Offer for Nets; From National to European Payments Champion

Nexi, post agreeing the SIA deal, plans to credibly establish itself as a European payments leader with the Nets merger; it is attractive on its...

Victor Galliano

Nexi SpA (NEXI IM): The Nets Purchase Is a Good Deal... I See a Rerate in Short and Longer Term

Assessing Nexi's price action from the agreement to purchase Nets. It is a good deal, with strong price action expected at the open and strategic...

Patryk Basiewicz

Ant Group (6688 HK): IPO Pricing Warrants a Re-Rating

Ant Group's share price at IPO is above the original expected range; still, we expect solid share re-rating potential given its growth prospects...

Victor Galliano

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)