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Paytm continues its southward journey - Mr. Santosh Meena, Head of Research, Swastika Investmart

Posted On: 2021-11-23 09:51:47 (Time Zone: IST)

Paytm is continuing its southward journey after listing on the back of liquidation by retail investors who were betting for listing gain however there is a lock-in period of 30 days for anchor investors. If we talk about the future outlook then it is still erratic because the market is not clear about its core business and timing of profitability.

We know that the Digital economy is witnessing exponential growth across the globe where India is in a leading position. The startup ecosystem is changing in India and many people think that India has the potential to produce big tech companies like what the US and China did in the past therefore there is a frenzy for new edge businesses IPO in India and most of the promotors want to cash out this euphoria with unrealistic valuations but in reality, only 1 or 2 companies will survive and create wealth for the investors while others will be wealth destroyers. We can take the example of the US market where many companies tried to cash out tech boom along with Google and Microsoft but most of them failed to continue with their business and even it took many years for both Google and Microsoft to reach their peak valuations of the time of tech boom.

Paytm comes out with exorbitant valuations where it was asking a market cap of 1.4 lac crore against the revenue of 3000cr means while Bajaj finserv which is an already listed fintech company with a proven track record of continuous profit and growth is trading at a market cap of 2.9 lac crore against revenue of 63000cr.

Paytm disrupt the payment industry post demonetization but it got disrupted by UPI. The biggest strength for Paytm is its massive customer base along with strong brand positioning however there is no clear moat with low entry barrier businesses. The market will watch how Paytm will use its strengths to enter into new businesses or create a moat and if it manages to emerge as a leader in a particular business then we can expect buying interest from lower levels otherwise it may take many years to reach its peak valuations.

I still have the same view that only very aggressive investors should stay invested in the company while others should look at exit opportunities at any pullback. There is no apple to apple comparison for Paytm but there are better-listed fintech companies that are available with reasonable valuations with a certainty of growth.

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