One 97 Communication Ltd, Paytm’s parent firm, has launched subscriptions for India’s largest initial public offering (IPO). Paytm plans to raise Rs. 18,300 crore at a price range of Rs. 2,080-2,150, valuing the business at Rs. 1.39 trillion at the top end, thanks to robust investor confidence, good equity market performance, and rising digital penetration.
Despite the fact that analysts feel Paytm’s IPO is the best bet for riding the Fintech IPO wave due to its market leadership, scope of operations, and varied product portfolio, they are concerned about the high valuations attached.
What benefits do investors gain from investing in Paytm?
Since its start in 2010, Paytm has built India’s largest digital ecosystem, with a gross merchandise value (GMV) of $4 trillion in FY21. It evolved into a comprehensive payments ecosystem that includes money transfers, credit, insurance, merchants, wealth management, and e-commerce services as it grew into a “super-app.”
It has 337 million clients, 21.8 million merchants, and a 40% share of the mobile transaction market.
Paytm enabled India’s digital move to a cashless economy shortly after demonetization.
After the implementation of the Unified Payments Interface in 2016, the space boomed, lowering transaction costs for Indians and making digital payments a low-cost commodity. This indicates that volume growth will continue unabated, even in the face of profitable business models such as PhonePe, Google Pay, and Whatsapp payments.
Despite the fact that analysts are positive about listing gains of 50-70 percent. Should you buy it at a 50% premium price, though, because there is a modest allocation caveat?
“If investors pay a premium for the stock, they may be looking at a two-year zero-return scenario.” As a result, when investing in new-age fintech companies like Paytm, one must be realistic in their return expectations. These businesses will not be valued on their profitability in the long run. As a result, it is critical to research the intricacies of business models and understand the risk that the company can take, as competition intensity is predicted to be extremely high and regulatory issues are expected in the future,” said Amit Khurana, Head of Equities at Dolat Capital Market.
Everyone wants to profit from the fervor surrounding brands that have become an inextricable part of our lives. Investors must consider the big picture. Will it perform according to the valuations it has established, and what kind of returns can one expect?
