Paytm is the most used and known app but today, let’s talk about something that is associated with the app and the management system of the whole company. SEBI has certain guidelines to follow while allocating IPO to various companies. Before diving more into the issue, let’s talk about the guidelines issued by SEBI for allocating IPO to various companies.
Guidelines of SEBI for IPO
In each of the previous three years, the issuer’s net worth must have exceeded INR 1 crore. In addition, the issuer’s net tangible assets must be at least INR 3 crores a piece, with no more than 50% of these assets held in the form of monetary assets in the past three years.
With this, we can get an idea of the basic guidelines for IPO allocation, but while talking about Paytm, the company has witnessed a high revenue downfall. All the previous reports and stats are the true figure that shows how the IPO is becoming a huge point of loss for all the retail investors.
Many retail investors somehow pretended that the IPO would surely make a huge loss. Still, the question arises was SEBI aware of the fact, or did SEBI make an unfair decision while allocating IPO to Paytm. Undoubtedly, many factors might have affected the growth of the revenues. Still, going through the popularity and usage of the application, it is quite hard to assume it was a natural loss.
One more question that raises questions against SEBI is, are the internal investors or the stakeholders also facing the same loss that the retail investors are going through?
On the NSE, LIC’s shares were listed at a discount of 8.11 per cent, at Rs 872 a share. The shares were stated and listed on the BSE at Rs 867.20 each, down 8.62 per cent from the Rs 949. Before LIC, the Paytm IPO in 2021, which raised Rs 18,300 crore, was the highest ever. The IPO price for Paytm was set at Rs 2,080 to Rs 2,150 per share.
However, the Fintech firm’s stock plummeted after its initial public offering (IPO) in November, and its shares are now worth less than a fourth of their IPO price. “We weren’t expecting a significant listing because markets were nervous,” LIC Chairman M R Kumar told reporters. “Expect it to pick up.”
Suresh Ganapathy of Macquarie Research believes LIC will find it difficult to transition into higher-margin policies because competitors have a strong presence in that market. Therefore, according to Reuters, he began covering LIC with Rs 1,000 and a neutral rating. Paytm shares closed at Rs 1,564.15 on the first trading day, down Rs 585.85 from Rs 2,150.
Talking about the previous days, one 97 Communications Ltd, or Paytm, was trading at Rs 590.70. Paytm’s market value has plummeted by roughly 51% since its IPO, losing approximately Rs 70,000 crore. The company was valued at Rs 1.39 trillion at the time of IPO.
Paytm founder Vijay Shekhar Sharma recently stated at the India Digital Summit that the company should be measured against non-banking financial services firm Bajaj Finance.
“We’re talking about $100 million in payments revenue this quarter, which is.. People underestimate payments income,” Paytm CEO Sharma said on the ETNow television station. “The greatest monetisable financial service is credit.” Paytm executes more loans than Bajaj Finance today in less than three years, despite Bajaj Finance has been around for 30-32 years.
The most recent statistics showed Paytm behind Bajaj Finance with 4.4 million loans disbursed in the December quarter. On the other hand, Bajaj Finance recorded 7.4 million loans during the quarter under review. Why are the statistics and the comments of the founder collapsing?
Possible reasons for Paytm IPO loss
The Expensive Evaluation
Paytm wanted a 47x price to sales at its IPO, but talking about the current scenario now trades at 26x due to the ongoing stock price adjustment. Despite all fierce competition in each and every of its business divisions and a lack of a market leader in any of them, a premium valuation was sought. Analysts are concerned that profitability will be difficult to achieve for some time.
According to analysts, most fintech companies trade at a price-to-sales growth ratio of 0.3x-0.5x internationally. The IPO raised roughly the amount of Rs18,200 crores, making it the second-largest after Coal India’s initial public offering in 2010.
Signals from the Federal Reserve have an impact
Recent signs that have shown the US Federal Reserve may have raised interest rates sooner than expected have harmed the valuations of new age/tech companies around the world.
“The impact of Fed tightening and greater tapering on high values is undeniable. However, the most significant impact has been felt by some of the new age, new tech companies in the United States and India, “JST Investments’ chief operating officer, Aditya Kondawar, stated. For example, in the United States, the ARK ETF has dropped about 50% in the previous year and 30% in the last two months.
Resignation from the senior executives
Paytm just announced the resignation of the three top executives. The top three list included Abhishek Arun, Paytm Payments Bank’s COO; Renu Satti, Paytm Payments Bank’s COO; and Abhishek Gupta, Paytm Payments Bank’s senior vice-president and COO. Before the IPO, five senior Paytm executives had resigned. Paytm’s president, Amit Nayyar, the company’s top human resources officer, Rohit Thakur, and three other vice presidents left.
“Another source of concern for the huge company is senior management attrition. According to the article, senior executives have been departing from Paytm, which is a cause for concern and might impact the company if the current pace of attrition continues.
Brokerages have downgraded the stock and have a low target price
Recent downgrades by all overseas firms have largely affected investor sentiment. Macquarie Research kept its underperform rating on Paytm its target price by almost 25% to Rs 900 from Rs 1,200. This suggests or indicates a further drop of 28% from the current price. On November 27, JM Financial initiated a sell rating and set a target price of Rs 1,240 per share.
These reasons can be actual, but still, SEBI needs to have a watch on the ongoing loss.