WHY SUBSCRIBE TO Paymate India Ltd IPO
Paymate India Limited is a leading B2B payments and services provider that digitizes, automates,
and streamlines business to business (“B2B”) payments in supply chains. (Source: RedSeer Report).
The company is a pioneer in the digital technology based B2B payment services market. (Source:
RedSeer Report) It seeks to improve the B2B supply chain payments process using its platform
across the entire value chain. Its platform is an integrated platform which includes multiple payment
categories including vendor payments, statutory and utility payments, providing a “fully-integrated”
B2B payments stack to its customers.
Objects of the Offer :
The offer comprises of fresh issue and an offer for sale. The fresh issue is of ₹11,250 mn out of
which ₹ 770 mn would be used for Investment for expanding its business into new geographies, ₹
2,280mn would be used for pursuing inorganic initiatives, ₹ 6,887 for placing cash as collateral with
its financial institution partners to improve its margins and the balance would be used for General
corporate purposes. The offer for sale amounts to ₹ 3,750 mn and the company won’t be receiving
any proceeds from it.
Paymate India ltd IPO ANALYSIS
Consistent track record of financial performance:
The company has seen significant increase in its revenue in FY21, increasing from ₹2,358.5 mn in
FY19 to ₹3,484 mn in FY21. The company’s EBITDA has decreased from ₹ (69.13) mn in FY19 to ₹
(249.64) mn in FY21. While the losses have increased from ₹ (79.61) in FY19 to ₹ (281.12) in FY21.
CONSOLIDATED FINANCIAL SUMMAry of Paymate India
(`₹ in Millions) |
FY19 |
FY20 |
FY21 |
Revenue from Operations |
2,358.50 |
2,161.39 |
3,484.00 |
EBITDA |
(69.13) |
(249.64) |
(255.97) |
EBITDA Margin |
(2.93) % |
(11.55) % |
(7.35) % |
PAT |
(79.61) |
(277.68) |
(281.12) |
RoNW |
(209.17) % |
(79.57) % |
(163.40) % |
EPS |
(1.58) |
(5.41) |
(5.41) |
Shareholding (%) |
Pre IPO |
Public |
66.70% |
Non-Promoter and Non-Public Group |
33.30% |
Share Reservation |
Net Issue (%) |
QIB |
75 |
NII |
15 |
Retail |
10 |
Company Leadership |
Ajay Adiseshan |
Chairman and Managing Director |
Monica Niranjan Doshi |
Independent Director |
Vishvanathan Subramanian |
Whole-time Director and Chief Financial Officer |
Issue Managers |
BRLMs |
ICICI Securities, HSBC Securities, JM Financial, SBI Capital market |
Registrar |
Link Intime India Private Limited |
Competitive Strength:
Leading B2B payments solutions provider
Paymate India Limited is leading5 B2B payments and services provider that digitizes, automates,
and streamlines B2B payments in supply chains and a pioneer in the digital technology based B2B
payment services market. (Source: RedSeer Report) It was the largest B2B payments player and one
of the fastest growing providers of on-line, card-based payment-processing services in India, in terms
of TPV processed in the nine months ended December 31, 2021, using commercial credit cards.
(Source: RedSeer Report). According to the RedSeer Report, the company is one of the first fullstack supply chain payments automation platform in India for enterprises and their supply chain,
which offers commercial credit cards as a payment instrument, GST, direct tax and utility payments,
vendor payments (accounts payables), collections (accounts receivables), automated reconciliation,
and invoice discounting (early payment discounting) and invoice financing. Paymate India Limited’s
platform provides solutions to enterprises such as credit checks, vendor payments, utility payments
and tax payments with automated processes. It has also launched the PayMate App thereby
extending the reach of its platform, for ease of use and access to commercial credit cards.
Long-term customer relationships and deep focus on user engagement
Paymate India Limited’s platform’s reach increased from 39,318 Users and 335 customers as on
March 31, 2019, to 116,858 Users and 49,953 customers as on December 31, 2021. It generally
acquires new customers through its business development team to develop business relationships
with prospective Enterprise customers and SME customers and its relationships with commercial
banks where the company is able to market to the business banking customers of these banks. The
company has relationships with three financial institutions. Once a customer is onboarded on to the
platform, it aims to cross sell its various services across the platform to ensure customer retention. It
has a competitive advantage over other technology enabled and traditional B2B payment solutions providers
because of its understanding of the payment processing needs of different types of
enterprises from multiple verticals within a supply chain and real-time integration with its customers’
system.
Relationships with key stakeholders in the payment automation ecosystem
In order to service the needs of its customers, Paymate India Limited maintains relationships with
commercial credit card issuing banks in India. Its relationships with these banks allow the company to
extend its customer base alongside the growth of the commercial credit card industry. It enables it to
reach more customers, with needs to make and receive online payments. These banks and financial
institutions, with which the company has relationships, account for 50% of all credit cards issued in
India in fiscal 2021 (Source: RedSeer Report). The key financial institutions it works with include SBI
Cards and Payment Services, ICICI Bank and another leading private bank in India. In addition, the
Company has a long-standing relationship with Visa, and Visa is also a shareholder in the Company.
It ensures that commercial credit cards processed through its system are only Visa cards for certain
international territories agreed with Visa.
Scalable and data-centric technology enabled platform
Paymate India Limited designed and built its platform using its in-house technology that enables it to
connect its customers with their vendors and integrate with banking platforms. The company’s
platform is scalable and provides the capabilities and flexibility to process front-end payments and
back-end reporting and settlement transactions for closed supply chains, which consist of the same
group of actors in a closed loop series of transactions. Its platform also gives them insights into the
way enterprises operate their businesses. This gives the company the ability to develop and provide
solutions to its customers and their vendors and suppliers using its technology enabled platform. Its
platform learns autonomously from the behavior of its customers on the platform to enhance its
service offering. The company’s platform has competitive advantage to launch and upscale efficiently
through simple integration with its customers’ systems.
Strong focus on processes and risk management
Given the volume and value of transactions conducted on its platform, mitigating risks and security
are core elements of its systems. The control, data collection and data analysis capabilities of
Paymate India Limited’s network and technology platform have enabled it to develop a strong
security infrastructure to retain its customers and financial institution partners and to attract
prospective customers and financial institution partners. Further, its platform provides its financial
institution partners with access to its platform, which enables them to determine the credit score of
counter parties based on information in the documents that the company collects during the knowyour customer process when it onboards new customers to its platform. The company has
implemented fraud prevention measures in line with the prevailing industry practices for systems and
cyber security. Its fraud risk management framework includes identifying, measuring, managing,
monitoring, and reporting of fraud risks.
Management:
-
Ajay Adiseshan (Chairman and Managing Director):He holds a bachelor’s degree in science (electrical engineering) from University of Colorado Boulder,
USA. In his current role in the Company, he is, among others, responsible for strategy, planning and
growth of the Company along with cultivating and maintaining investor relationships. He is also
responsible for leading product innovation and overseeing the Company’s functionalities to reach its
targets
-
Monica Niranjan Doshi (Monica Niranjan Doshi):She holds a master’s degree in commerce (external) from University of Bombay and a post-graduate
certificate in human resource management from Xavier School of Management.
-
Vishvanathan Subramanian (Whole-time Director and the Chief Financial Officer):He holds a bachelor’s degree in commerce from University of Bombay and is a qualified chartered
accountant. In his current role in the Company, he is, among others, responsible for collaboration
between various department across the Company to ensure synergy in operations. He manages the
operational, financial and risk management activities along with overseeing the legal and financial
compliances of the Company.
Risks:
-
The company operates in a regulated industry and are subject to evolving laws and regulation
governing its business. In particular, if the company is unable to obtain the authorization from
the RBI pursuant to the Payment Aggregators Guidelines, its business may be adversely
affected.
-
Its largest customer and its top five customers (other than its largest customer) contributed
20.68% and 43.50% of its revenue from operations for the nine months ended December 31,
2021, respectively. Any loss of business from one or more of them may adversely affect its
revenues and profitability.
-
The company is reliant on its contracts and arrangements with Visa Inc. in respect of B2B
digital payments solutions and any disruptions of its relationship with Visa or termination of its
contracts and arrangements will have an adverse effect on its growth prospects
-
The company relies on its financial institution partners to facilitate digital payments for its
customers, and any failure to maintain its relationships with them or disruption in their services
could have an adverse impact on its business.
-
Certain statutory and regulatory licenses and approvals are required for conducting its
business and any failure or omission to obtain, maintain or renew these licenses and
approvals could materially and adversely affect its business
-
* For complete list of risk factors kindly refer to the Draft Red Herring Prospectus.
Weakness:
-
If it is unable to maintain competitive pricing of its products and services or
maintain low customer acquisition costs, we may not be able to attract and
retain customers
-
The company has a history of net losses and have experienced negative
cash flows in previous Fiscals. It needs to generate and sustain increased
revenues while managing its expenses to achieve profitability, and its
inability to achieve these goals may have an adverse effect on its business
-
The success and growth of its business depends upon its ability to innovate
and develop new products and services. Failure to innovate and develop its
products and services could have an adverse effect on its prospects
Opportunities:
-
Tax payments made by corporates in India can give rise to approximately
USD 248 billion of payments opportunity and are increasingly digitalized,
accelerated by a government push.
-
B2B utility payments are an approximately USD 80 billion market in Fiscal
2022. B2B payment market in India and GCC countries amount to
approximately USD 12 trillion in 2021 and is expected to become
approximately USD 17 trillion market by 2025.
Threats:
-
If it is unable to attract new customers to its platform, retain and grow its
relationships with its existing customers, and increase transaction volumes
processed on its platform, its business and financial condition could be
adversely affected
-
Its international expansion efforts may not be successful or may subject its
business to increased risks.
-
A decline in the use of commercial credit cards as a payment mechanism
for customers or adverse developments with respect to the payment
processing industry in general could have a materially adverse effect on its
business.
Strategies going forward:
Exploiting the network effect of its platform
Paymate India Limited aims to exploit the network effect created by the addition of every user and
customer on its platform. The company aims to achieve this by leveraging its existing Enterprise
customers and SME customers and financial institution partner relationships to grow its SME
customers and users. Once a large enterprise is on-boarded on to its platform as a customer, the
company aims to bring the vendors, suppliers, buyers, dealers, and distributors of customers on to its
platform as SME clients for their vendor payments, GST and direct tax payments, thus resulting in a
cascading effect of organic growth of its platform. SME customer acquisition is further bolstered by
extending its platform to business banking customers of its financial institution partners.
Leverage its leadership to capture favorable industry dynamic
According to the RedSeer Report, global commercial payments volume was estimated at
approximately USD 134 trillion in 2021. RedSeer estimates that India has approximately USD 8
trillion of the global commercial payments volume, CEMEA, approximately USD 10 trillion and AsiaPacific estimated at approximately USD 58 trillion. This presents Paymate India Limited with an
opportunity to exploit this latent demand and enabling these SMEs to access credit and funding using
its platform. In addition, the company is also focused on diversifying the industry sectors of the
customers that it targets. According to the RedSeer Report, its wide suite offerings to enterprises,
such as payment automation and dashboard support, drive superior engagement as compared to
other peers. The company’s focus across industry sectors has enabled it to expand from a historical
concentration in the travel and airline industry segment to other sectors of the economy.
Expand its geographical presence in international market
Paymate India Limited has commenced operations in the UAE during the current fiscal year, through
PayMate LLC and plan to further expand in the UAE. It has also established PayMate India SPC, a
subsidiary in Oman, during the current fiscal year to develop and expand in Oman. As on December
31, 2021, PayMate LLC on-boarded 3 customers of different industries. The company aims to
expand into CEMEA, which has a large B2B payment market of around USD 10 trillion in 2021
according to the RedSeer Report, in the future. It plans to continue to expand its presence in the
APAC region through partnerships, in particular Southeast Asia and Australia. The company aims to
leverage its existing customers in India with global operations to expand its offering to their offices in
other geographies. This will further allow the company to attract new customers to its platform in
these geographies.
Grow its customer base in India
Paymate India Limited aim to expand its presence in India by targeting potential customers across
India. As it adds SME customers through its enterprise customers and its financial institution
partners, its customers are now based out of multiple cities and towns. The company has designated
a team for sales and marketing functions. The strategic regional focus of its sales and marketing
network enables it to target SMEs by virtue of bank reference and customized solutions. Further, the
company intends to cross sell additional solutions in the platform to its users. As the company utilizes
data analytics to gain deeper insight to the needs of its users through their behaviors on its platform,
the company can understand usage patterns, identify service and solution gaps and improve its
offerings to create an overall better experience for its users.
Increase its penetration in the existing supply chain ecosystem
Paymate India Limited intends to deepen its engagement with its existing customers by increasing
the adoption of the invoice discounting and supply chain credit offering that we provide through its
financial institution partners. This would lead to increased customer transaction volumes through its
platform and deepen relationships with its customers, which would also allow it to provide customized
solutions to such customer’s vendors, suppliers, buyers, dealers, and distributors. Increasing its
presence in the existing supply chain ecosystem will allow it to expand its offerings, increasing
overall revenues for it and providing customized solutions that have higher margin offerings.
Selectively pursue acquisitions
Although Paymate India Limited are primarily focused on growing its business organically, it may
selectively pursue strategic acquisitions to enhance its competitive position, improve its operations
and expand its business. The company may choose to acquire new technologies, expertise, volume
and capabilities, enter new market segments or enter new geographies
Expand its relationships with financial institution partners
Leveraging on its connection with the Issuing Banks, Paymate India Limited can expand its reach to
other clients of the Issuing Banks. As on December 31, 2021, the company has relationships with
three financial institution partners, namely SBI Cards and Payment Services, ICICI Bank and a
leading private bank in India, to issue commercial credit cards to customers and are seeking to
deepen its partnerships with these financial institutions.
Disclaimer -
The content on this page is made available on the basis of the DRHP (draft red herring prospectus ) filed by Paymate India Limited. The
final content could change based on the Red Herring Prospectus (RHP) filed