Vijay Shekhar Sharma, founder and chief executive officer of financial services technology company One97 Communications Ltd that runs Paytm, informed India's exchanges on Wednesday that his stock grants will be vested to him only after the company’s market capitalization crosses the initial public offering (IPO) level on a ‘sustained basis’.
“Against the backdrop of volatile market conditions for high growth stocks globally, our shares are down significantly from the IPO price,” Sharma said in a letter to shareholders on Wednesday. “Rest assured, the entire Paytm team is committed to build a large, profitable company and to create long-term shareholder value. Aligned with this, my stock grants will be vested to me only when our market cap has crossed the IPO level on a sustained basis,” Sharma added.
The letter was notified to the country's stock exchanges along with Paytm’s quarterly update on operating performance in which Sharma said he expects Paytm to be operationally profitable in the next six quarters. Sharma’s comments on the company’s path to profitability and the business growth numbers notified by the company lifted Paytm’s stock nearly 5% on BSE.
The stock ended trading on Wednesday at Rs 639 a piece on BSE, up 4.9% from its previous close of Rs 609.30.
Sharma’s comments follow the hammering that Paytm’s stock has taken in the public markets since it got listed on the bourses in November last year at an IPO price of Rs 2,150. At the IPO price, Paytm had a market capitalization of nearly Rs 1.4 trillion ($18.6 billion), which has since reduced to Rs 41,443 crore ($5.52 billion).
Paytm has since lost its tag as the most-valued startup in India to Byju's (at the IPO price, it was seeking a valuation of about $600 million more than the edtech startup's valuation). The company also lost its tag as the most-valued fintech startup in India, and now trails RazorPay's $7.5 billion valuation in the Indian fintech space.
Public shareholders have raised concerns over the company’s path to profitability as it has not registered a single net profit to date. Moreover, the company’s net loss for the quarter ended September 2021 widened to Rs 473 crore, even as it reported a 64% growth in its operating revenue on year. Even for December 2021, the company’s net loss widened 45% to Rs 778 crore, despite a 90% jump in its revenue on year.
Many global and domestic investment advisors have advised against buying the company’s shares and have slashed their target prices on the stock. For instance, in a recent report, the financial services company Macquarie Group had slashed Paytm’s 12-month target to Rs 450 a piece from Rs 700 in January. Macquarie, in January, had also cut Paytm’s 2020-21 (FY21) to 2025-26 (FY26) revenue growth estimates to 23% on a compounded annual growth rate basis from 26% earlier. Moreover, the financial services group said that Paytm has limited potential to scale distribution business for merchant loans.
To be sure, Paytm is not the only new-age technology company to be trading at multi-month lows.
PolicyBazaar’s parent PB Fintech Ltd, food delivery and restaurant aggregator platform Zomato Ltd, Nykaa’s parent FSN E-Commerce, among others, too are trading significantly below their IPO prices. This has also led to many startups which had filed draft papers with the markets’ regulator for an IPO to push back their plans to get listed.