Paytm Payback

18th November 2021 was a bad, bad, bad day for Paytm.

But, first, let me tell you the amazing growth story of Paytm.

Noida-based Vijay Shekhar Sharma started Paytm (shortened “pay through mobile”) in 2010. In 2016, demonetization happened and the government aggressively pushed for digital payment. Leveraging on this policy decision, Sharma became India’s youngest billionaire in 2017 and his company changed the landscape of India’s traditional financial ecosystem - forever.

Presently, Paytm revenue streams come from three business verticals (Payment services, Financial Services, and Commerce & Cloud services) and it is impressive how the company has expanded in every nook and cranny of the financial technology domain. Few critics whisper that the company has stretched itself too thin (reminds me of good old ‘Patanjali’ and its furious expansion).

Long story short - riding on the waves of success, one day, the company decided to launch its IPO (actually for its parent company one 97 Communications Ltd). The oversubscribed IPO made 350 Paytm insiders millionaires.

Then, 18 November 2021 happened…

On day 1 of Paytm’s stock market listing – shocked retail investors watched helplessly as Paytm share value eroded by 27% intraday (opening INR 1955, closing INR 1564.15) and wiped off crores worth of investor capital! Paytm leadership was not ready for the rude shock. In the evening, an emotional Paytm founder admitted the experience “overwhelms” him and shed tears on camera.

The market is divided on how to interpret this fiasco. 'For Paytm' camp said it was unfair to judge based on one days’ performance while the 'against Paytm' camp pointed out the red flag was already visible. And, it was Paytm’s expensive valuation. Macquaire research report pointed out that Paytm’s business model lacked “focus and direction” and the company was a “cash guzzler”.

The debate continues, but lakhs of retail investors are stuck with the stock.

P.S. As I write this piece, Paytm stock trades at INR 539…

Image courtesy: https://www.flickr.com/photos/sasha-india/41990198900 (Under Creative Commons License)