Paytm Money goes deeper into broking opens IPO investments

Paytm Money, the wealth management arm of digital payments major Paytm, is set to open up IPO investments for its users, the company said in a press note on Monday. This is part of the Alibaba- and Softbank-backed Paytm’s overall aim to expand its financial services bouquet and match larger tech brokers such as Upstox, Zerodha and 5Paisa in terms of offerings.

“In the near future, we plan to launch IPO funding, derivatives trading, margin finance and a host of other value-adding features to make investing seamless and convenient. This is aligned with our mission to drive financial inclusion across the country,” said Varun Sridhar, Chief Executive Officer, Paytm Money.

Paytm needs its ancillary business bets to work out since its core payments business continues to be a low-margin and mostly zero revenue game. While on the one hand it is offering banking, on the other it is offering loans and credit cards hoping to recover losses incurred in the core payments business. Paytm Money has also been losing money.

As of 2019, the company spent Rs 37 crore to generate a turnover of Rs 76 lakh. Its 2020 filings have not been made public yet.

Eyeing better prospects

Broking can be an extremely profitable business and these back to back product launches are expected to help Paytm on that path.

Paytm Money opened stockbroking for all participants through the app in September. In October the company added ETFs or exchange traded funds. Now, it has opened up IPO participation for its users as well.

Initial Public Offerings or IPOs are the first set of shares offered by companies that get listed on bourses. Paytm is hoping to bring in more retail traders to participate in IPOs by making the application process simple and seamless through the Paytm Money app.

Leveraging UPI

The Bengaluru-based company said that it would allow traders to use their UPI IDs to apply for IPOs and link the transaction to their bank accounts. The entire process will be completed within three to four days, the company claimed.

The platform offers an interface to make changes to, cancel or reapply for a bid within the IPO window. It is equipped with features such as enabling investors to track upcoming IPOs, view a company’s history, its details, download the prospectus, and also check the performance of past IPOs. This service is available on both the Paytm Money app and website.

Unlike buying and selling of stocks, which is a pretty straightforward process, an IPO process involves allotment of a set number shares within a few days of the IPO window closing. In comparison with the days of the paper-driven process, UPI has made allotments digital and simple.

Tech-enabled brokers such as Zerodha have leveraged the UPI-enabled process to get more retail traders to participate in the IPO process. Now, Paytm Money joins their ranks hoping to get tech-savvy traders and first-time market participants to place their IPO bids through the Paytm Money app.

Paytm Money had been launched as a direct mutual funds platform and had Pravin Jadhav as its chief executive. However, Jadhav quit in early 2020 to make way for Sridhar.