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As all of you know 2021 was exemplary of an Indian startup. In 2021, India’s 44 startups turn unicorns where its valuation crosses $1 billion. Even though there is the dark shadow of the Covid pandemic but still it could stop the triumph of Indian startups.
Paytm IPO is another big reason to celebrate the rise of the startup boom in India. As Paytm announced its highest IPO valuation ever made by the Indian startup.
In the IPO Paytm was about to raise $3billion at a valuation over $16 billion. So, there was huge expectation built over Paytm IPO. Even it is one of the most valued IPO in the Indian startup ecosystem.
Another special note is that the majority of the startup will bring their IPO to foreign markets. But Paytm made it open in the Indian market.
As IPO of brought in 2021, it is open of the Indian market. But all the hopes and hype were diminished. Because Paytm IPO was an utter failure. Subsequently, Paytm share price was falling steeply in the market.
So, here in this blog, we will uncover the reasons behind the Paytm IPO failure.
Reason for the Paytm IPO failure
As Paytm IPO was regarded as one of the highest valued IPO in the Indian startup ecosystem. But the IPO went unconventionally.
Higher Valuation
One of the main reasons for the Paytm IPO is its higher valuations. Any business or company brings its IPO according to the size of the company and revenue generation capability of the company.
But Paytm did not procedurally bring its IPO. Instead, it came to the IPO with unconventional valuations. Valuation mainly depends on the present and future growth of the company.
Here, Paytm could not able to increase its revenue from the past 3 years. As Paytm annual revenue is stagnant up to 3500 crores. So, the company did not have any growth in recent times.
Hence, any company without any sign of growth cannot raise its valuation. Even though the company’s growth is below par still Paytm made its IPO in the fanciest manner.
So, due to extreme hike in the valuation is one of the primary reasons for the Paytm IPO failure.
Also Read: Indian Budget 2022
Intense Competition (Paytm IPO Failure reason)
Paytm was one of the leading online payment solutions in India. In 2016, after the demonetization, Paytm made its services available to the consumer most extensive manner.
During that time, people for the first time made use of the online payment system. From then there is no break for the Paytm growth in terms of revenue and userbase.
But Paytm could not able to run successfully in the following years. Because there is intense competition in the online payment platforms.
Phone pe and Google pay are the main rivals for Paytm. Now Phone pe has over 46% of the market share. Whereas, Google pay claims at having 36% of its market share in India.
Due to the intense competition, there is no demand for Paytm services anymore.
Foreign Investors
Paytm is the second most valued startup in India. As there is a lot of demand and hike during 2015 and 16 in India. People are now transforming from physical payment to cashless payment via Paytm.
During that time, foreign investment came from all sides of the country. The majority of the investment is made by Chinese companies.
Many famous investors in the world like Warren Buffett and Ali Baba’s Ant financial made the investment. Even Softbank and Elevation Captial had the share of 18.37% and 17.65% respectively.
It is evident that Paytm had a lot of investment resources from foreign companies. But now the foreign investors were not able to get the return.
These foreign investors have insisted Paytm to the public for a much higher valuation. So, that they can sell their shares and get the money back. As the foreign investors were fed up with the slow growth of the company.
Even there was speculation, that Paytm is a Chinese company. This speculation was made by the Indians because they knew the majority of investment came through a Chinese company. In addition, Jack Ma also made an essential investment in the company.
So, many people in the country are reluctant in using the Paytm app. Pressure from foreign investors and the rise of the valuation is one of the major reasons for the Paytm IPO failure.
Even in the IPO, nearly 10,000 crores were raised in exchange for the shares from foreign investors.
Business Model
Paytm could not able define its definite business model. As the company was doing everything. The company had too many services like
- Online payment services
- Digital gold business
- Movie tickets bookings
- Gas booking
- Electricity bill payments
- Fantasy gaming.
- Flight ticket booking
- Train ticket booking
- Digital wallets
- Paytm payment banks
So, there Paytm was offering too many services and lacking in the direction. Even the company could not able recognize the service that brings a major revenue source.
Hence, Paytm was like the jack of all and master of none. So, Paytm could not impress the investors via its business model.
Even Paytm did not have the way to come in the insurance and mutual funds field. Because Paytm accept policies and compliances.
The weak business model is another reason for the Paytm IPO failure in India.
Online Wallets ( Paytm IPO Failure reason)
Paytm could differentiate itself from other companies in terms of wallets. Even it was one of the major revenue sources for the company.
But after the rise of the UPI payments, there is a drastic decline in wallet users. So, Paytm has to set a major setback in the race. Even it added to the slow growth phase of the company.
So, these are some of the important reasons for the Paytm IPO failure in India. Even now the Paytm share price is declining. There is a huge loss for the Indian investors.
Now, Paytm has to fight back to win the trust and hope of the investors. So, now the company is busy finding the way for its revenue growth.
Mainly its high valuation and share price is the reasons for its failure in the Indian markets.
So, this will the lesson for the startups and then many companies can have double-check over their valuation before coming to their IPO.