New Delhi, Nov 29, : Investors and entrepreneurs are concerned about the Paytm listing scandal.They fear that it could undermine a series of Indian flotations that were to establish India as a top destination for tech start ups after China and the US, Financial Times reported. This scandal has brought Paytm, SoftBank and Alibaba to the forefront, as well as the bookrunners of the IPO, Morgan Stanley, Citigroup, Goldman Sachs and Morgan Stanley.
“Is this going to have an impact on the wider India tech sentiment?” One bad deal or one instance of bad judgement can throw off the apple cart,” said the head for equity capital markets in India at a western bank.
“Valuation will be very difficult.”
MobiKwik is an Indian fintech company that delayed its IPO originally scheduled to take place in November.However, the report stated this week that it would “list at the right moment”.
Ashneer Grover was the co-founder and CEO of fintech BharatPe.She said Paytm had “spoiled the Indian market.”
Sandeep Murthy, a partner in the Mumbai-based investment group Lightbox, stated that there might be a “some period” of cooling off in fintech listings before next year, but that it was “natural”, Financial Times reported.
According to Dealogic, Indian tech companies have raised a record amount of $5bn through listing this year.This is about 10 times the amount achieved last year.
Paytm’s core business is not profitable and Paytm made a decision to reduce marketing expenses to make it more profitable before listing.This was according to Prashant Gokhale (Hong Kong-based cofounder of research group Aletheia Capital).According to the report, he stated that there was a lot of hype about SoftBank and Warren Buffett.
Paytm’s discussions regarding the IPO pricing were directly known to one person.He said that there was too much liquidity chasing deals, especially since China’s crackdown made India more attractive as a destination.
According to the person, “Investors are desperate to find places to go, which has pushed up prices without fundamentals improving.” The report stated that investors spent a lot of money trying to get the deal, but are likely happy now.
Paytm’s large Chinese ownership poses a reputational and regulatory risk after India placed strict restrictions on Chinese investment last year.Financial Times reported that Ant and Alibaba sold shares in the IPO.However, they still hold nearly a third of company stock.
Paytm’s difficult debut could be a blessing in the end if it encourages investors to examine other highly-valued and hyped Indian tech companies with scepticism.Lightbox’s Murthy stated that Paytm’s debut was “at least encouraging” for him.
The report stated that “if a market blindly valued things, that would (be a) bigger challenge in the future.”
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