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Paytm, a payments company, is aiming to raise $2.5 billion amid India’s stock boom.

With stocks on a tear in India, the parent company of Paytm, a leading digital payments app, went public on Monday with hopes of becoming the country’s largest initial public offering.

The company, One97 Communications, aims to raise about $2.5 billion in a three-day offer that ends on Wednesday. It has already drawn huge institutional investors like Abu Dhabi’s sovereign wealth fund, the Texas teachers’ pension fund and the University of Cambridge, which have invested more than $1 billion.

Paytm was founded in 2010 as a payments transfer business. It now allows users to send money to friends, buy small items like coffee or clothing, and finance big-ticket items like cars.

All but ubiquitous in India’s biggest cities, Paytm commands more than 40 percent of India’s digital payments market. The company has yet to turn a profit, but it is benefiting from a surge of interest from foreign and Indian investors looking for a stake in India’s surging internet economy. The I.P.O. could value the company at $20 billion.

“Paytm is evolving into a marketplace in itself,” said Amit Khurana, an analyst with Dolat Capital in Mumbai. “There is a lot of appetite to allocate money to this kind of model because it’s seen as the business of the future.”

Investors, in general, have been increasingly bullish on the Indian economy’s recovery from the pandemic and a series of related lockdowns that slashed industrial activity and consumer spending sharply.

India’s central bank, the Reserve Bank of India, has steadily cut interest rates, encouraging banks to lend more and consumers — particularly young, savvy online shoppers — to spend more.

“We are now in a sweet spot, where the bank recovery is coinciding with the demographic transition, which in turn is coinciding with the digital revolution,” said Madhavan Narayanan, an economist in India. “All these three are making the sun and the moon and the stars align for young India.”

With coronavirus infections in India low and foot traffic returning to brick-and-mortar stores, newly sanitation-sensitized shoppers may prefer to scan QR codes rather than handle cash.

The pandemic has helped a trend in India toward a cashless economy that began with the government of Prime Minister Narendra Modi’s sudden demonetization in 2016. The policy, meant to tamp down on money laundering, banned the most widely circulated currency notes, wiping out families’ savings and shuttering businesses overnight. But five years later, it appears to have also created some winners, digital payments companies like Paytm among them.

Competition is heating up. Google offers Google Pay. India’s richest man, Mukesh Ambani, began a joint venture with Facebook last year to offer digital payments over WhatsApp, India’s most popular messaging service.

Paytm’s share offering is the latest in a series of oversubscribed I.P.O.s in recent months, among a bevy of so-called unicorns backed by e-commerce giants like China’s Alibaba and its financial affiliate, Ant.

In July, institutional and foreign investors also flocked to the initial public offering of India’s food delivery app, Zomato, which was oversubscribed by 38 times the available shares.

The Reserve Bank of India predicted in an August report that 2021 “could well turn out to be India’s year of the initial public offering.”

Paytm’s push to become India’s biggest initial public offering has overshadowed another sizable offering. The parent company of Nykaa, an online beauty products retailer, was publicly listed on Monday, seeking a $7.4 billion valuation.

Sameer Yasir contributed reporting.

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