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As Paytm Lists At Discount, Its High-Flying Billionaire Founder And India’s Frothy IPO Market Face Reality Check

By News Creatives Authors , in Billionaires , at November 18, 2021

Digital payments provider Paytm’s parent company, One97 Communications, had a tepid debut on the stock market Thursday, listing at 1,950 rupees (about $26) and at a valuation of $17 billion. The listing price was at a 9% discount to its issue price of 2,150 rupees. The stock closed at 1,560 rupees on the first day of trading—a 27% drop from its issue price.

The much-awaited IPO and the country’s largest ever public issue raised $2.5 billion (183 billion rupees) through a fresh share issue of $1.1 billion (83 billion rupees) and a sale of $1.4 billion (100 billion rupees) worth of shares by a slew of investors. The latter included Paytm’s billionaire founder and managing director, Vijay Shekhar Sharma; private equity players such as SAIF Partners and Elevation Capital, as well as Masayoshi Son’s SoftBank and Jack Ma’s Alibaba.

Sharma, who debuted on the billionaires list in 2017, now holds a 13.7% stake in what is India’s largest payments platform. Sharma sold nearly 2 million shares in the IPO and his fortune is now at $2.2 billion after the first day’s closing price—down from his pre-IPO net worth of $2.35 billion. Paytm’s last funding round a year ago valued the fintech firm at nearly $16 billion. The company was reportedly expecting an IPO valuation north of $20 billion, which some investment bankers had dubbed an ambitious target.

The IPO was subscribed 1.89 times, a modest figure in India’s red-hot IPO market. The proceeds will be used for acquiring new customers and merchants to expand Paytm’s existing base of 337 million registered customers and 21.8 million registered merchants. The funds will also be used for acquisitions, new business initiatives and strategic partnerships.

Paytm, which had a gross merchandise value of $54 billion (4 trillion rupees) in the fiscal year ended March 2021, offers payment services, cloud services and financial services. The Noida-based company was already expected to have a lukewarm debut because of the high valuation and the fact that it had been making losses for the last few years.

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It reported a loss of $231 million (17 billion rupees) for fiscal 2021 against revenue of $434 million (31.9 billion rupees). In fiscal 2020, it reported a net loss of $390 million (29.4 billion rupees) on revenue of $470 million (35.4 billion rupees). In fiscal 2019 it registered a loss of $612 million (42.3 billion rupees) against revenue of $518 million (35.8 billion rupees).

Paytm’s tepid IPO is in stark contrast to the stellar stockmarket debut of cosmetics and fashion player Nykaa, which was subscribed 82 times and listed at a hefty 79% premium. This star turn made Nykaa founder Falguni Nayar the richest self-made woman in India with a net worth of $7 billion.

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Sharma, 43, who studied electronics and communications at the Delhi College of Engineering, started One97 Communications in 2000 as a service provider for telecom operators. In 2009, he rolled out Paytm as a payment service for prepaid phone users to top up their mobile accounts and to shop using their bank accounts or credit cards.

He still remains CEO and oversees engineering, design and marketing at the company. Paytm benefited immensely from India’s 2016 demonetization, which voided 86% of the country’s currency. Thereafter, it attracted a slew of marquee investments from the richest billionaires across the globe, including Warren Buffett, Jack Ma and Masayoshi Son.

Sharma is active on social media and has 517,000 Twitter followers. He posts regularly on Twitter on a variety of subjects, ranging from global wealth to the Japanese economy. When the IPO opened, Sharma visited the Tirupati temple and tweeted that the visit was to “seek blessing of God for all of the Paytm family.” Today he tweeted on Paytm being the country’s largest IPO after Coal India. “From coal to a fintech, in 11 years—India has transformed. To every Paytmer, you’ve changed India for good.”

Despite the lacklustre listing, Paytm has its cheerleaders. “Paytm is the mascot of the payment eco-system and will continue to be the TCS [Tata Consultancy Services] of this space even as other nimble competitors enter,” says Ganesh Natarajan, chairman of 5F World, a digital investing consultancy. “The tides of e-commerce euphoria have taken all valuations to new peaks and there will be some ebbing of prices in the short term. But in the trillion-dollar ‘Digital India’ these innovators will justify their valuations.”

The Indian digital payments market, which was valued at $20 trillion in fiscal 2021, is expected to grow to $40 trillion to $50 trillion in fiscal 2026 spurred by government initiatives and expanding reach of digital payments.

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