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Aditya Goela, CFA

Aditya Goela, CFA

Co-Founder and Trainer at Goela School of Finance LLP | Chartered Financial Analyst® | Proprietary Trader | JoshTalk Speaker
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Success Story of Paytm – Vijay Shekhar Sharma Founder & CEO of Paytm

Aditya Goela, CFA

Aditya Goela, CFA

Co-Founder and Trainer at Goela School of Finance LLP | Chartered Financial Analyst® | Proprietary Trader | JoshTalk Speaker
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VIJAY SHEKHAR SHARMA – the name that demands no introduction in 2021. His success story has echoed in 2021 as Paytm proved to be one of India’s biggest fintech startups and largest public issues listed on the Stock Market. In recent years, the country has produced a flurry of successful startups, with 60+ of them making it to the unicorn category. However, Paytm has reached enormous heights, breaking boundaries and evolving to the vision of founder and CEO- Vijay Shekhar Sharma. His journey started from earning Rs 10,000 p.m. in 27 to accumulating $2.4 billion net worth as estimated by Forbes list of India’s 100 Richest people (2020).

Life of Vijay Shekhar Sharma:

Born in 1978 in Aligarh to a middle-class family, he was the third child to his teacher father and a homemaking mother with three other siblings. He was a bright student in his Hindi-medium school academics by completing his schooling at 14.

He took admission to Delhi Institute of Technology at 15 and was the youngest engineering graduate in the college. Coming from a Hindi-medium background, English proved essential for survival in college. Instead of giving up, he self-learnt the English language through reading old, borrowed and translated textbooks in English and Hindi. This perseverance laid the foundation of gritty character cultivated into students of share market courses online

On account of his poor performance in studies, he slowly lost interest, stopped attending college and ultimately chose to pursue his passion in Entrepreneurship.

He and his friends had created a Content Management System- XS Communications, later used by The India Express. While arranging funds for his company, he was trapped in an unpayable debt cycle, which forced him to take odd jobs. His self-designed and developed search engine website- Indiasite.net, was sold for $1 million after two years in 1999. 

SUCCESS STORY OF PAYTM –

The parent company of Paytm- One 97 Communications was established in 2000 by Mr Sharma. It started by selling content to users through the telecom operators. He foresaw immense potential in the vision of people using smartphones for online transactions in future. With that vision, Paytm was launched in August 2010, and moved to online payment systems in 2014 by launching their licenced wallet product.

In just a few days, Paytm became insanely popular among the masses due to its feasibility in paying electricity, water and gas bills. In two years, the user base of Paytm had increased to 2.5 lakhs due to convenience at taps becoming its USP. By 2017 Paytm became India’s first payment app with over 100 million downloads. Paytm Money also became a popular MF investment destination for people. 

Paytm got its biggest breakthrough among common folk when the Indian government announced the demonetisation in 2016. It led to people switching towards digital payments in a phase of cash crunch, which directly boosted the operations of Paytm.

It slowly integrated other services like Paytm Payment Banks, Paytm Gold and FASTag recharge. The biggest achievement for Paytm came in November 2021, when it launched its IPO- the biggest IPO in India which even surpassed historical Coal India and Reliance Power IPO.

The journey of IPO and what followed:

With the IPO inbound, social media became the hotspot for gossips, speculation and analysis for the achievements of Paytm and its journey. Immense brand loyalty, market dominance and brand value had driven people to garner gargantuan faith in IPO. It led to huge to sufficient listing speculations by retail and even some of the big finance houses. On the contrary, some raised eyebrows on the valuations of the IPO even it was normality expected in a bull run. 

Want more knowledge of Pre IPO Analysis of Paytm, refer here:

The listing of Paytm proved to be a horror show as the stock tanked by almost hitting a lower circuit of 20%. The negative sentiment was visible in the first 15 min candle itself, which started the bloodbath for the optimistic investors. Soon after the financials came out to the daylight, the real problem surfaced. Anyone who has done a share market learning course, or has good knowledge of fundamental analysis, would find the following issues in the financials of the company:

a. Negative Operating profit and Operating profit Margin since 2015

b. Negative Profit before Taxation

c. High valuation

d. Negative Interest Coverage

e. Negative Free cashflow, ROE and ROCE

These five factors are the reflection of the extremely poor financials of the company. Even with immense brand loyalty and promising data of Compounded Profit Growth for the trailing 12 months, it is a far fetched vision calling Paytm a fundamentally sound company. 

As far as the technicals on 1st January 2022, the 50MA and 200MA data on daily charts are unavailable. RSI indicates that it is fairly placed above the oversold region (the region which gives the best buying opportunities).

We understand that you might be deeply interested in the analysis of Paytm, so here’s the in-depth Post-IPO Analysis for you:

Lessons to learn with the Paytm IPO:

  1. Valuations play a crucial role in deciding the sentiments, directly affecting the listing.
  2. Oversubscription doesn’t guarantee listing gains.
  3. Brand Loyalty doesn’t guarantee listing gains.

IPO markets are a tricky place as nothing entirely assures a listing gain. The best option for retail people is to refrain from investing blindly in every IPO. Pursuing a fundamental analysis course from a good share market classes provider will boost the capability to make sound investing decisions. Wise investors and traders always know how to invest their money in themselves. 

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