Paymate files DRHP for Rs.1,500 crore IPO

At a time when digital payment players are struggling and franchisees are having second thoughts about their IPOs, Paymate has gone ahead and filed for its proposed IPO with SEBI.

PayMate, incidentally, is backed by Visa and Lightbox, and it is a leading provider of B2B payment solutions for the SME and the MSME segment in India. The total size of the IPO is expected to be Rs1,500 crore as per the draft red herring prospectus (DRHP) filed. 

In terms of IPO details, the overall IPO of Rs.1,500 crore will comprise of a fresh issue of shares to the tune of Rs1,125 crore and an offer of sale (OFS) of Rs.375 crore by the existing early investors and also the promoters.

While the fresh issue will bring in fresh funds into the company, it will also be capital dilutive and EPS dilutive. The OFS will only lead to change in ownership and improve the floating stock of the company post the IPO.

The biggest participant in the OFS will be the promoter, Ajay Adiseshan, who will be offering shares worth Rs.135 crore. In addition, Lightbox Ventures will offer shares worth Rs.127.38 crore while Mayfield FVCI will offer shares worth Rs.1.5.66 crore.

Other promoters and early investors in the company will be offering much smaller quantities of shares in the IPO. Lightbox will look to take a substantial exit from the PE investment in PayMate.
 

That brings us to the question of how the fresh issue proceeds will be utilized. Out of the total fresh funds raised, PayMate will utilize Rs.77 crore for organic investments for expanding its business into new geographies.

A sum of Rs.228 crore will be used for pursuing inorganic initiatives of mergers and acquisitions. Finally, the company has allocated Rs.689 crore for placing cash as collateral with its financial partners to improve its margins.

PayMate works across the spectrum of major Visa commercial card-issuing banks to offer credit for payables and monetizing receivables across supply chains.

In addition, it also moves traditional cash, cheque, and EFT to card streams with risk-mitigating benefits for banks and offering extended payables time frame for buyers. PayMate has a total of 49,953 customers, of which 480 were Enterprise Customers while 49,473 were in the SME category. 

In terms of the vertical of services offered by Paymate; it provides Procure to Pay automation, credit evaluation and discount marketplace. It also provides the requisite APIs for integration into existing accounts and legacy systems.

PayMate is entirely cloud-based and accessible easily from anywhere. PayMate is present in India and UAE and has expansion plans across Central Europe and Africa too.

For FY21, the total revenues of PayMate were up 61.2% YoY at Rs.348.40 crore. However, due to the front ended nature of expenses in the said business, it reported a net loss of Rs.28.11 crore in FY21. The top line has grown aggressively in FY22, if you go by 9-months data.

The issue will be lead managed by ICICI Securities, HSBC Securities, JM Financial and SBI Capital Markets. They will act as the book running lead managers to the issue.