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Shares of Paytm hit an intraday low of Rs 1,586.35 on the NSE with investors losing as much as 25% to its issue price of Rs 2,150.

The unlisted shares of One97 Communications, Parent of Paytm surged over 100% just in a week as the company gears up to bring an IPO by Diwali. According to recent developments, the board of One97 Communications’ has given its in-principle approval for the $3 billion (Rs 22,000 crore) IPO.

As per reports, the company may file a draft red herring prospectus (DRHP) in the next 2-3 months and the IPO, which probably would be the biggest till, date should hit the D-street around Diwali this year. The company raised $1 billion in November 2019 at a valuation of $16 billion from investors like SVF Panther, T Rowe Price, AliPay and others.

The shares of One97 Communications were actively traded in the unlisted market at Rs 10,000-12,000 apiece implying a valuation of around 10 billion dollars before the IPO buzz thrilled the unlisted market. The scrip then surged to almost Rs 22000 after the IPO news.

Reasons behind the rush:
The startups are usually valued on the basis of the latest funding rounds. The funding round, back in 2019 valued the company at $16 billion while the unlisted market was valuing the company at around $10 billion. The proposed IPO, according to some media reports may value the company above $25 billion. The huge valuation gap between the unlisted market and rumoured IPO valuations led to a sudden upside and re-valued the shares in the unlisted market.

How to buy unlisted shares of One97 Communications (Paytm)?
The process of buying unlisted shares is quite different compared to buying any listed shares. Unlisted shares cannot be bought through exchanges. It is a person-to-person deal and mostly, there are dealers who are specialised in dealing of unlisted shares who facilitate such transactions.

Threats and opportunities
In FY2019, the losses stood at Rs 4217.20 crore. The company is yet to deliver profits. Meanwhile, Paytm is facing stiff competition from global players like PhonePe, Google Pay and Amazon Pay.

On the other hand, in FY2020 their overall transactions have grown by over 50%. The expansion in financial services vertical like mutual fund, stockbroking and probable entry in the insurance sector may lead to profitability by 2022.

Process of buying unlisted shares (Usually followed):
a) Buyer-seller gets connected for the deal.
b) Deal is fixed by confirming rate and quantities.
c) Buyer transfers the consideration amount for the shares purchased and provides his/her demat details to seller.
d) On receipt of the consideration amount and demat details, the seller transfers the shares via off-market share transfer in buyer’s demat account.

The process is usually completed in 24 working hours. However, it may vary depending upon the seller/dealer.

(Caution: As there is no intermediary like stock exchanges in unlisted market, one should be utmost careful while dealing and should deal with reputed sellers/dealers/parties. The writer is the founder of UnlistedArena.com, which deals in pre-IPO and unlisted shares, views expressed are personal.)