Why Paytm’s IPO flopped

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Hello readers,

Have you ever been really excited about something, only to be bummed out when it didn’t live up to expectations? It happens sometimes, whether it’s a new restaurant that’s not as great as you heard, or checking out a popular attraction that looks way better on social media than in person.

I felt let down in those instances, but I imagine that pales in comparison to how disappointing it is when a company that lists on the stock market doesn’t perform as well as expected. After all, there’s a lot of painstaking work and effort involved with doing an initial public offering, and in the case of Indian fintech firm Paytm, it didn’t quite pay off.

Today we look at,

• Paytm’s lackluster stock market debut
• The fresh funds raised by the company behind SGag
• Other newsy highlights such as J&T Express’ latest investment haul and why Ant Group’s valuation took a hit

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When a listing doesn’t go as planned

Image credit: Timmy Loen

Several Indian startups have gone public this year: Some have been pretty successful, while others got a lukewarm response to their market debut Unfortunately, fintech firm Paytm fell into the latter category, and we check out the reasons why.

• A plunge: Paytm’s IPO was touted as India’s biggest listing, but it lost US$900 million in two days. And while it was oversubscribed 1.89x, this is small compared to the numbers racked up by other Indian tech unicorns such as Nykaa (82x), Zomato (38x), and PolicyBazaar (17x).

• Too much and not enough: Some sources pointed out that Paytm’s valuation was too high and that it lacks a clear road to monetization. While the firm’s gross merchandise value rose 112% year on year between April and October, much of that growth was due to unified payments interface (UPI)-based transactions, which don’t generate income for Paytm. Monetizing UPI payments is not possible in India because the service is free.

• Competition is stiff: Competition from other digital payment players is also hurting Paytm’s prospects. PhonePe dominates the space, holding over 45% market share. And while Paytm’s underwhelming debut will not undermine upcoming listings in India, other companies with a similar or weak business model that are looking to exit via an IPO may put their plans on hold.

Read more: Why was Paytm’s market debut a flop?

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