Investment themes in a Paytm IPO

Noida headquartered Paytm, founded by Vijay Shekhar Sharma,  will be soon tapping the capital market. This fintech giant with investment from global biggies like Chinese Alibaba Group and Japanese Soft Bank is building a financial services supermarket on top of its payments business. The entire model is data-driven with a super app Paytm. This new-age company, though consistently making losses, was last valued at USD $ 16 billion by private equity investors. The IPO listing is expected to give a mind-boggling valuation of  USD $ 24 to 30 billion, which is more than 50 times the revenues of the company. Globally, the payments companies like Visa and Mastercard are valued at less than 25 times their revenues. Paytm has a lot to prove in the public market where profitability and predictability of revenue stream matter. The market would be keenly waiting for a break-even road map,  profitability guidance, and key valuation drivers, and scaling up of high-margin businesses. There is also a promoter risk as founder Sharma, who built the company from scratch, currently owns less than 15 percent stake and is no longer classified as a promoter. The future direction of the company now depends a lot on the foreign investors which control a majority stake in the company. Watch this video for known unknowns in the Paytm IPO.