Paytm IPO valuation

We, the students of NIT-Kurukshetra prepared this presentation to calculate the valuation of the upcoming Paytm IPO by One 97 communications.
It consists of the financial statement and shareholding pattern analysis of the company.

1. PAYTM IPO Valuation Analysis By: Akshita Mishra Ridhi Kochar

2. COMPANY OVERVIEW Parent Company: One97 Communication Founded In August 2010 Founder Vijay Shankar Sharma Initial Investment $2 Million Year 2015 Received license from RBI to run as Payments Bank Paytm Payments bank was formally launched by the Union Finance Minister of India, Arun Jaitley on November 28, 2017 Registrar: Link Intime India Pvt Ltd IPO Size is Rs. 16600 crore Book value per equity share Rs.1084

3. Picture Source: Economics Times

4. Pre IPO lock in Large investors will sell shares Paytm will remain foreign owned Losses to continue Sebi's caution on Paytm Money Run in with regulators on insurance Paytm's NUE could face hurdles Paytm's loan to founder for insurance buy Ratan Tata, Warren Buffett to sell some shares Non debt liabilities, penalties, lawsuits galore TOP TAKEAWAY FROM DRAFT RED HERRING PROSPECTUS

5. If we are unable to attract merchants to our ecosystem, grow our relationships with our existing merchants, and increase transaction volumes on our platforms, our business, results of operations, financial condition, cash flows and prospects could be materially and adversely affected. If we fail to retain our consumers, attract new consumers, expand the volume of transactions from consumers, or if our consumer acquisition costs increase, our business, revenue, profitability and growth may be harmed. We may not be able to maintain and strengthen the network effects of our platform, which could have a material adverse effect on our business, financial condition, results of operations and prospects. Failure to maintain or improve our technology infrastructure could harm our business and prospects. R ISK FACTORS IN THE WORDS OF THE DRHP

6. We rely on our financial institutions partners to provide our financial services and products, and any failure to maintain our relationships with them could have an adverse impact on our operations. We have a history of net losses, we anticipate increasing operating expenses in the future, and we may not be able to achieve and maintain profitability. We have experienced negative cash flows in prior years. There are pending litigations against our Company, Subsidiaries, and certain of our Directors.

7. Net Cash Flow (Amounts in INR Million) FY 21 FY 20 FY 19 Operating Activities Rs. 20825 Rs. 23766 Rs. 44759 Investing Activities Rs. 19298 (Inflow) Rs. 19963 (Outflow) Rs. 19110 (Inflow) Financing Activities Rs. 22210 (Outflow) Rs. 51599 (Inflow) Rs. 21105 (Inflow) CASH FLOW STATEMENT ANALYSIS Operating cash flow- negative Cash used in investing activities in 2020. Significant reasons are: 1.More investment in joint ventures 2.The proceeds from non current investments has been quite less. Cash used in financing activities in 2021 1.No significant issue of shares 2.Net change in working cap demand loan has been negative( maybe it was repaid)

8. (Amounts in INR Million) 31 March 2021 31 March 2020 31 March 2019 Current Assets Rs. 73998 Rs. 64357 Rs. 66709 Current liabilities Rs. 21552 Rs. 16660 Rs. 27219 Current Ratio 3.43 3.86 2.45 RATIOS ANALYSIS Current Ratio Debt/equity- Long term debt/ Equity- Company is debt-free Interest coverage ratio- EBIT/Total interest expenses- no earnings+0 borrowings hence interest is NIL. Quick ratio- same as current ratio as inventory in NIL (Paytm is a service based start-up) .

9. Key takeaways from the Horizontal Analysis of the Income Statement Payment and financial services majorly contribute to rfo (75%) Other income as a % of rfo was recorded at 13.7% which is more than the standard 10%. Payment processing charges hold a significant 69% of the total RFO. INCOME STATEMENT ANALYSIS

10. Key takeaways from the Vertical Analysis of the Income Statement Contribution from commerce and cloud services has come down to 24.7% in 2021 as against 34.1% in 2020 and 47.5% in 2019 due to the covid pandemic. Marketing and promotional expenses have seen a significant reduction from 105% of RFO to ~ 43% in 2020 and ~19% in 2021. Employee benefit expenses have seen an increase on yearly basis due to increased hiring of personnel. Depreciation and amortization expenses are seeing a marginal increase. Total expenses have come down on an yearly basis.

11. ANALYSTS VIEWS Future of the business is in digitisation. Paytm operates as a fin-tech which sees a massive growth in the future. A major proportion of the expenses included Marketing and promotional expenses which are declining significantly. Paytm has the largest customer acquisition for its payments and financial services segment which is a strong signal of its deepening roots. As per a report of the Economic times, Paytm is expected to break even in the next 12-18 months. Widening of the services offered by Paytm like Inclusion of paytm gold, paytm money etc. are making sure that the customer stays at one place for all her financial needs.