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

<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 will launch its IPO on 8 November at an indicative price range of Rs2,080-2,150 per share. The IPO comprises a primary raise of Rs83,000 million ($1.1 billion) and a secondary raise up to Rs100,000 million ($1.3 billion). The total IPO proceeds of $2.4 billion are around 10% higher than its earlier target. </p><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 stated 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 for 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. </p><div class="content-highlight"><p>In this note, we look at the updated prospectus which outlines the 1QFY22 results (for the quarter ending June) and recent developments. Overall, the recent results show a strong return to growth, reducing loss margin and reinforce our view that Paytm has attractive fundamentals. We will discuss valuation in our next note.  </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 will launch its IPO on 8 November at an indicative price range of Rs2,080-2,150 per share. The IPO comprises a primary raise of Rs83,000 million ($1.1 billion) and a secondary raise up to Rs100,000 million ($1.3 billion). The total IPO proceeds of $2.4 billion are around 10% higher than its earlier target. In Paytm IPO Initiation: A Payments-Led Super-App, we stated 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 for 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. In this note, we look at the updated prospectus which outlines the 1QFY22 results (for the quarter ending June) and recent developments. Overall, the recent results show a strong return to growth, reducing loss margin and reinforce our view that Paytm has attractive fundamentals. We will discuss valuation in our next note.  

<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.

Thematic (Sector/Industry)

<ul>
<li>Our key positive picks in payments are two Brazilian companies, <a href="https://www.smartkarma.com/entities/pagseguro-digital-ltd" target="_blank" data-smartkarma-citation="entities:27939:1" rel="noopener">Pagseguro Digital Ltd (PAGS US)</a> and <a href="https://www.smartkarma.com/entities/cielo-sa" target="_blank" data-smartkarma-citation="entities:24750:1" rel="noopener">Cielo SA (CIEL3 BZ)</a> </li>
<li>PagSeguro is our main pick, attractive on GARP metrics and with its higher take rate, it is our preference over its closest peer StoneCo</li>
<li>Cielo, the leading legacy payments company in Brazil, has seen its shares under pressure; yet fundamentals should be supported by the recent approval of WhatsApp Payments, given that Cielo is WhatsApp’s processor of payments</li>
<li>
<a href="https://www.smartkarma.com/entities/dlocal-ltd-uruguay" target="_blank" data-smartkarma-citation="entities:33377:1" rel="noopener">DLocal Ltd/Uruguay (DLO US)</a> listed on NASDAQ in early June; the shares are up by 150% from its IPO price, and, even given the growth potential, valuations are looking full, so we see an opportunity to take profits</li>
<li>
<a href="https://www.smartkarma.com/entities/square-inc" target="_blank" data-smartkarma-citation="entities:23755:1" rel="noopener">Square Inc (SQ US)</a> is another premium growth story, but one where we believe current valuations are running ahead of the fundamental prospects</li>
<li>
<a href="https://www.smartkarma.com/entities/paypal-holdings-inc" target="_blank" data-smartkarma-citation="entities:4747:1" rel="noopener">Paypal Holdings (PYPL US)</a>  and <a href="https://www.smartkarma.com/entities/mastercard-inc-class-a" target="_blank" data-smartkarma-citation="entities:15529:1" rel="noopener">Mastercard (MA US)</a>, although not as compelling on valuations as PagSeguro and Cielo, are also attractive stocks</li>
<li>Risks to our positive view on Cielo include lower than expected revenues from the WhatsApp Payments contract and for PagSeguro this includes a weaker than expected business climate for its core SME client base; risks to our negative calls on DLocal and Square include stronger than expected transaction activity and revenue generation going forward</li>
</ul>


Our key positive picks in payments are two Brazilian companies, Pagseguro Digital Ltd (PAGS US) and Cielo SA (CIEL3 BZ) 
PagSeguro is our main pick, attractive on GARP metrics and with its higher take rate, it is our preference over its closest peer StoneCo
Cielo, the leading legacy payments company in Brazil, has seen its shares under pressure; yet fundamentals should be supported by the recent approval of WhatsApp Payments, given that Cielo is WhatsApp’s processor of payments

DLocal Ltd/Uruguay (DLO US) listed on NASDAQ in early June; the shares are up by 150% from its IPO price, and, even given the growth potential, valuations are looking full, so we see an opportunity to take profits

Square Inc (SQ US) is another premium growth story, but one where we believe current valuations are running ahead of the fundamental prospects

Paypal Holdings (PYPL US)  and Mastercard (MA US), although not as compelling on valuations as PagSeguro and Cielo, are also attractive stocks
Risks to our positive view on Cielo include lower than expected revenues from the WhatsApp Payments contract and for PagSeguro this includes a weaker than expected business climate for its core SME client base; risks to our negative calls on DLocal and Square include stronger than expected transaction activity and revenue generation going forward


Equity Analyst, LightStream Research

Oshadhi Kumarasiri

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

<p>Benefiting from investor demand for COVID-resistant stocks, <a href="https://www.smartkarma.com/entities/base-inc" target="_blank" data-smartkarma-citation="entities:28353:1" rel="noopener">BASE Inc (4477 JP)</a> had an excellent run during the last six months, as share price increased more than 1,330% from the March 2020 low levels.</p><p>BASE was listed on 25th October 2019 at ¥1,300 per share - the higher end of the proposed price range and currently trades at ¥11,000 per share.</p><p>On 24<sup>th</sup> September 2020, the company’s board of directors resolved to raise around $125m via issuing 1.2m new shares to European and Asian institutional investors. The underwriters to this secondary offering are Daiwa Securities and Mizuho Securities. The book building period ends on 9<sup>th</sup> October 2020.</p><p>The company plans to use secondary listing proceeds on advertising, recruitment, M&amp;A and working capital purposes.</p><p>We feel this is an opportunistic move by BASE Inc to take full advantage of the currently inflated valuation multiples and therefore would avoid subscribing to the offer. Moreover, we would wait for a price reaction to the positive news flows such as BASE online store growth and consider arranging a short position at 20.0x consensus FY+2 EV/Sales – around ¥12,800 per share.</p>

Benefiting from investor demand for COVID-resistant stocks, BASE Inc (4477 JP) had an excellent run during the last six months, as share price increased more than 1,330% from the March 2020 low levels.BASE was listed on 25th October 2019 at ¥1,300 per share - the higher end of the proposed price range and currently trades at ¥11,000 per share.On 24th September 2020, the company’s board of directors resolved to raise around $125m via issuing 1.2m new shares to European and Asian institutional investors. The underwriters to this secondary offering are Daiwa Securities and Mizuho Securities. The book building period ends on 9th October 2020.The company plans to use secondary listing proceeds on advertising, recruitment, M&amp;A and working capital purposes.We feel this is an opportunistic move by BASE Inc to take full advantage of the currently inflated valuation multiples and therefore would avoid subscribing to the offer. Moreover, we would wait for a price reaction to the positive news flows such as BASE online store growth and consider arranging a short position at 20.0x consensus FY+2 EV/Sales – around ¥12,800 per share.

BASE Inc Raising $125m Via an Overseas Secondary Offer Targeting European and Asian Investors

Netherlands

Adyen N.V. provides payment solutions. The Company offers a platform that enable merchants and businesses to process payments online, mobile, and point-of-sale systems with payment methods including card schemes, mobile wallets, and other local methods. Adyen serves customers worldwide.

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Adyen BV (ADYEN NA)

Paytm IPO: Bright Spot

Paytm will launch its IPO on 8 November to raise $2.4 bn. The updated prospectus which outlines the 1QFY22 results and recent developments...

Arun George

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

Payments Companies – Our Core Picks

From our review of ten payments companies, we pick PagSeguro and Cielo as buys; we would take profits on recently listed DLocal and Square; other...

Victor Galliano

BASE Inc Raising $125m Via an Overseas Secondary Offer Targeting European and Asian Investors

Benefited from investor demand for COVID-resistant stocks, BASE Inc (4477 JP) had an excellent run during last six months, as share price increased...

Oshadhi Kumarasiri

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