“No Investor Comes For A Day”: Vijay Shekhar Sharma On Paytm’s Weak Debut
Paytm made an underwhelming debut this morning, with the stock opening on the NSE at ₹ 1,950 (Rs 1,955 on the BSE) – against an issue price of ₹ 2,150
New Delhi: Paytm founder and CEO Vijay Shekhar Sharma struck a defiant note Thursday evening after shares in the digital payments firm crashed as much as 28 per cent on market debut, leading to concerns among investors and analysts questioning its expansive valuation – around $20 billion.
Mr Sharma, who cried with joy at the opening ceremony, told NDTV “no investor comes for a day”.
“One day’s loss does not represent the whole picture. We have to do a good job in explaining the Paytm business model… this is just the first day. We are growing (in terms of) revenue, we are growing (in terms of) margin. We are expanding and we will continue to expand,” Mr Sharma told NDTV.
“It is a multiple Test match series, it’s not over if one or two wickets are lost.”
“The market deserves a good quality company… (that) creates good revenue,” he said, as he underlined the need to allow investors time to understand the wide variety of services Paytm offers, including insurance and gold sales, movie and flight tickets, and bank deposits and remittances.
“There is no doubt a payments company can expand to insurance, investments. We need to explain the business model of our company, and execute that business model,” Mr Sharma said.
Paytm – which reported a loss of $3.82 billion in the quarter ended in June (Rs 2.84 billion for the same period last year) – made an underwhelming debut this morning, with the stock opening on the NSE at ₹ 1,950 (Rs 1,955 on the BSE) – against an issue price of ₹ 2,150 – before settling at ₹ 1,560.
Analysts says the firm’s valuation may have been behind a poor first session.
“… it (Paytm’s valuation) is saying I’m 20 per cent of HDFC Bank, 40 per cent of Kotak Bank and I’m 65 per cent of Axis Bank. This is pure financial insanity,” Anurag Singh, the managing partner at Ansid Capital, said.
Analysts at Macquarie Research told clients the Paytm business model lacked “focus and direction”, and that the company was a “cash guzzler”.
Mr Sharma hit back hard, telling NDTV his company’s focus at this time was investing in people. He had earlier also defended the notion that Indian technology startups were overpriced.
“The investment we are doing (now) is in engineering and sales people. We could switch to profit if we don’t invest in customer acquisition and new technology. That is a choice we are making…” he said.
“Overall we are investing in the future. We will continue to expand. We had to make an obligatory disclaimer…. revenue is growing phenomenally. Do we want to return an immediate profit or build technologies for the future?” he asked.
Mr Sharma also suggested Paytm would benefit from being an Indian company, and that the country would evolve into becoming “a sustainable place for tech companies that generate employment”.
Despite the opening day dip Paytm clocked a valuation in excess of ₹ 1 crore.
And the analysts did have some positive feedback, saying the company – around a third of which is owned by Chinese tycoon Jack Ma’s Ant Group, Japan’s SoftBank, and Warren Buffett’s Berkshire Hathaway – could turn profitable when it did not need to invest “so much” to fuel growth opportunities.
Launched in 2010, Paytm grew quickly after ride-hailing firm Uber listed it as a payment option and its use swelled further in 2016, after the government’s overnight ban on high-value currency notes.
Paytm’s success has turned Mr Sharma, a school teacher’s son, into a billionaire with a net worth of $2.4 billion, according to Forbes. Last week’s IPO also minted hundreds of new millionaires.
