Paytm IPO - Weak listing, road ahead and why it is a long-term story: Experts decode

India's largest initial public offer (IPO) so far, Paytm, made a tepid debut on bourses on Thursday, last trading day of the week. Paytm was listed on the BSE at a 9% discount to Rs 1,955 per share against its issue price of Rs 2,150 on Thursday. This was a decline of 9.07% or Rs 195. This was in line with the anticipation of the street. Besides other factors, the main reason behind weak listing of Paytm IPO was dubbed as higher valuations of the offer. Experts also cited cash-burning business model and a loss-making company as other reasons.  

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Speaking on Paytm listing and road ahead, Manoj Dalmia, founder and director, Proficient equities private limited, said the company is overvalued at a price/sales value of 26 as compared to global peers at 0.3 -0.5 P/S. Highlighting that Paytm is not a market leader in any business, he said that 75% promoters of the digital payments brand are from other countries, which are selling stakes by offer for sale (OFS) worth Rs 10,000 crore, which is more than 50% of IPO value.

On road ahead for Paytm shareholders, Proficient equities founder said that the Reserve Bank of India (RBI) is mulling to bring policies for fintech in BNPL (Buy now, pay later) space, which should help the digital payments brand Paytm. "Monetization of UPI, which if free of cost currently,   could be a game changer too for Paytm too," he said.  

In another setback on the day of the listing, global financial services group Macquarie has downgraded its rating to 'underperform' and gave a target price of RS 1,200. "Paytm’s business model lacks focus & direction. Achieving scale with profitability is a big challenge.  The company is a cash guzzler. Besides, regulations and competition are added worries for this firm," Macquarie said in its report.  

Meanwhile, expert feels that Paytm could be a good bet in the long-term. "Businesses like Paytm are always long-term stories, which focus on market share in initial years of operation rather than on profits. Paytm is expected to have positive cash flow by 2030, which is a real long gestation period. Hence, most of HNI's & Institutional Investors have given a pass to Paytm IPO" says Amit Jain, Co-Founder and CEO, Ashika Wealth Advisor.