We all are familiar with failure of Paytm IPO as it lost it 60% value since the day of listing, not only retail investor but also stock market god 'Warren Buffet' also a victim of paytm falling strome
So today we are gonna talk about thing that went wrong with Paytm ;-
Top 5 Reasons Behind Massive Failure of Paytm IPO
1. Overpriced listing
The biggest factor leading to Paytm’s fallback in the stock market was its excessively overpriced listing. Analysts and market experts have been long pointing out the inflated valuation of the unicorn that actually turned out to be a disaster recipe.
The IPO was issued for Rs. 2,150 per share which was much higher than the actual valuation of the company leading to losses. One97 Communication, the parent company of Paytm, traded at 49.7 times its FY21 revenue. This was when the company wasn’t even recording any profits which brings us to our next reason of Paytm’s IPO debacle-
2. Bleak prospects of profitability
The company stands in the myriad of financial troubles. Since its inception, Paytm has raised equity capital of total Rs. 190 billion. It is a matter of grave concern that 70 percent of it, which translates to Rs. 132 billion, has been used to recover losses of company.
One after another, the company has constantly been venturing into various business lines- payment wallet, commerce, investment, insurance, etc. Sadly, none of the business division exhibit signs of strong financials. The company is burning cash with vague prospects of profitability.
3. Questionable future of Paytm
Institutional investors have time to time expressed concern about the future of Paytm. And the frenzy is now more than ever. One of the major reason behind distrust is the absence of license to enter the lending business.
Lending divisions are the most profitable source of revenue for any fintech. A company providing financial services has to have a lending verticle in order to be in good books of analysts.
Paytm, however, lacks the license to enter this segment of fintech market.
4. Increasing competition from UPIs
One the success story of last decade, Paytm has now been beaten by the other competitors in the market who have outperformed company’s numbers. While the consumers are adopting UPI payments for easy direct bank transfers, Paytm is facing a massive competition from big sharks that are already more successful.
The biggest threat for the company is PhonePe which constitutes 42% of overall UPI transactions of the country. It is followed by other big names such as Google Pay and BHIM. PhonePe and Google Pay together constitute more than 82% of the UPI market of India which has a lot to say about Paytm’s future in this segment.
5. Flawed analyses of the Paytm IPO
A report by Macquarie Research highlighted a stark flaw in the analysis of Paytm’s valuation. The analysts on Thursday revealed how the valuation of Paytm was decided by the foreign investors. Foreign investors have a higher appetite for risks in the stock market unlike Indian investors who have conventional metrics of investment. When it comes to Indian market, profitability and earnings are the top priority- the segments where Paytm stand no chance.
According to experts, if Indian investors are willing to buy Paytm shares in the future, one should decide to do that only when the price come down to Rs. 1100-1200. This figure again is not devoid of risks and investors should have appetite for the same.
That's all for today, see you soon with new blog
Social Plugin