IPO underperformed due to external market factors: Paytm’s Vijay Shekhar Sharma
Founder and CEO of digital payments giant Paytm Vijay Shekhar Sharma says the company’s highly anticipated initial public offering (IPO) in early November received a disappointing response, mainly due to the timing of the issuance and other general market factors that have affected fintech companies globally.
Speaking to Sequoia Capital Managing Director Rajan Anandan at the India Digital Summit, Sharma gave a scorecard to suggest that fintech companies around the world have suffered in the public market during this time.
“Overall, we probably entered a time when Quantitative Easing (QE), free money and many other metrics scared the market a bit in terms of pricing…. We are a payment company. Payment has a derivative revenue position in financial services, driven by credit. Paytm’s success will be what we do financial services led monetization as payment is a high growth revenue position. This quarter we are talking about about $100 million in payments,” he said.
Adding $40 million from merchant services, Sharma said the payments industry is now a $140 million (quarterly) vertical that he expects to grow by at least 50-60% from one year to the next.
He said the company has achieved contribution margin profitability for its payments business, while the financial services unit led by the credit business is growing significantly. Citing previously reported figures, Sharma said that Paytm disbursed 4.4 million loans worth Rs 2,180 crore in the December quarter.
“I can say this deeply to everyone that our business has never looked better than this, better in scale, better in revenue, better in profit, better in contribution (margin) , better in terms of long-term compound earnings,” he added.
One97 Communications Ltd., the parent company of digital payment platform Paytm, got off to a weak start on November 18 last year. The stock closed down 27.25% or Rs 585.85 to Rs 1,564 from the IPO price of Rs 2,150 on BSE. Previously, the stock debuted at Rs 1,950, a 9.3% discount to the issue price. On NSE, the stock closed down 27.44% at Rs 1,560 from the issue price. The stock closed at session lows on both exchanges.
Commenting on the funding frenzy in the market, Sharma said Indian start-ups will continue to witness large capital inflows over the next two to three years before a correction hits the ecosystem.
“Just as life and death are realities, it is clear that there will be an incredible wave of funding, it happens every 10 years…. (There will be) another two or three years of money and after that , everything will be fine,” he said.
Sharma attributed the incredible funding boom mainly to the loose monetary policy of the US government and advised young entrepreneurs to try their luck now.
Beyond financial services, Sharma said he sees big growth opportunities for electric vehicles (EVs) and healthcare solutions.
“The global electric vehicle ecosystem – supply, demand, maintenance, electric delivery or charging, etc. – is waiting to evolve in unprecedented numbers. This is an opportunity to reset the automotive sector, which is one of the most important industries. It would open up new players and new opportunities. Second, healthcare is contemporary, healthcare is underrated, and healthcare is where customers are willing to spend money “, he added.
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