Global Market Conditions Impacted IPO: Paytm Founder

Vijay Shekhar Sharma, confounder of One97 Communications, that owns Paytm, said that negative macro trends impacted the company’s initial public offering (IPO) even as the stock fell further on Wednesday.

In one of his first public appearances since that company’s disastrous market debut in November last year, Sharma, in a conversation with Sequoia Capital managing director Rajan Anandan at IAMAI’S India Digital Summit 2022, said that One97 went public at a time when global markets were spooked by various factors that affected its listing performance.

“Globally, we probably went in at a time when QE, free money and many other parameters brought a little spook out of the market,” he said. “South American companies are over 70% down. That’s not the reason completely. That’s a macro reason.”

Sharma said the business is doing well, driven by payments revenue.

“The success of Paytm will depend on what we do with monetization led by financial services,” he said. “Payment is a revenue line item which is growing massively. This quarter we are talking about $100 million revenue from payments which is like a sizable revenue.”

He claimed Paytm was seeing higher revenues at lower costs. “People are underestimating the compounding impact that the customer base on this platform has,” he said. “We have spent much less than any year ever…Our business has never looked better.”

One97 stock closed at Rs. 1,081.45 on the BSE on Wednesday, down 3.41% from the previous closing.

Paytm’s market cap is down to $9.49 billion, as of Wednesday, from its peak private market valuation of $16 billion.

One Monday, brokerage firm Macquarie had slashed the target price of Paytm’s parent to Rs. 900 from Rs. 1,200. This was 58% lower compared to the issue price of Rs. 2,150.

Macquarie said Paytm’s payments business accounts for 70% of overall gross revenues and hence any regulations capping charges for digital payments could affect the company.

Sharma said the contribution margin for payments continued to be in the double digital for Paytm. He said quarterly revenue from payments has hit $140 million if the merchant services it provides are included, and its revenue is expected to grow 50% to 60% year-on-year.

“Credit it the most monetizable financial service,” Sharma said. S-ET

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