Paytm is a company that has achieved a significant level of fame due to the way it has introduced Indians to recharge phones and settle their bills online. The founder, Vijay Sharma, the typical ‘small-town boy’ who had big dreams and burned the midnight oil to start his business, is the face of true inspiration. The launch of Paytm’s IPO was anxiously awaited by many in the industry, but failed to make the grade and disappointed most investors. However, as with all failures, there are lessons to be learned from the failure of the Paytm IPO, and one should keep these in mind when investing in IPOs of the future.
Any upcoming IPO is viewed with much enthusiasm by the investor community, especially if a well-known company such as Paytm is the subject of a listing on the stock exchange. However, IPO investment should be a well-thought out decision and investors need to do their homework before allocating funds to any IPO, whether it's a popular company being listed or not. In the case of Paytm, the picture of an IPO was certainly a rosy one, and the company’s exponential growth since the days of demonetization is a known fact. However, the company did make some errors, and analysts acknowledge this now. For instance, some of the company pivots were smart and made the most of opportunities, while others were prone to be reckless.
Lessons to Learn
Paytm, by many experts, is recognized as a relatively new-age business model. Consequently, the same experts believe that when investors choose to enter into any transactions with such businesses in mind, such as make IPO investments, investors must grasp the dynamics of the company, comprehend potential valuations and evaluate the future plans of the company and the way in which it is going to grow. The investors who invest in an IPO, thus, cannot blame the failure of an IPO for their own lack of adequate knowledge before making an investment.
The most important thing to do while you are investing in an IPO (technically shares of a certain company), is to be extremely sure about the company. Secondly, a few radical businesses/companies possess niche technology and a niche share in the market. Although such companies do well, take Zomato and Nykaa, some do not experience such listings of a blockbuster nature. The Paytm listing was meant to be a blockbuster in IPOs, but valuations were stretched far beyond limits. The mistakes that investors often make are often in the ways they view a company, and base speculations on that, without really going into fundamental analysis.
Paytm shares did a huge tumble when shares went down by 58% after the company got listed. From an initial valuation of $20 billion, it has come down to a paltry $7.8 billion. Now, the company is ardently trying to convince investors about its solid growth path, anxiously hoping to win back some capital. However, in terms of IPO investment, individuals are not thinking about Paytm as rising expenses of the company and a global sell-off of its equity have cast a dark shadow over its potential for future positivity. If you wish to invest in any IPO, like the upcoming LIC IPO, you should open a Demat account with a superior broker like Motilal Oswal, and get your investment going.
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