Paytm is still struggling to convince investors after disastrous IPO

Indian Actions company – trading under its parent name, One97 Communications – plunged in the days since they began trading in Mumbai at the country’s largest initial public offering when measured in local currency.

The shares rose Tuesday but are still below their issue price by more than 30%, a loss of $ 5.7 billion in market value.

Analysts raised several concerns about Paytm in the run-up to its offering. The company lost hundreds of millions of dollars last year and appears to be far from ready to turn a profit.

It also faces growing competition from some of the world’s largest tech firms. Companies like Facebook (full board) and Google (GOOGL) They are using a technology backed by the Indian government called the Unified Payment Interface.

“Delving into multiple lines of business prevents Paytm from being a category leader in any business except wallets, which are becoming inconsequential with UPI’s meteoric spike in payments,” Macquarie analysts wrote in a research note last week. .

“Most of the things that Paytm does, all the other big players in the ecosystem like Amazon, Flipkart, Google, etc. are doing,” the analysts added.

Big questions remain about how Paytm can effectively benefit from its huge customer base, according to Prashant Gokhale, COO of Aletheia Capital.

Paytm said in its initial public offering filing that it had 337 million registered consumers and 22 million merchants. But Gokhale told CNN Business that the problem is how the company can turn those consumers into revenue.

“They have a lot of subsidiaries. They have insurance, they have securities brokerage, they have financial services,” Gokhale said, adding that the company wants to make money by selling those additional services to existing users of its payments application.

But he said those companies are riddled with competition, making it difficult to see how there is a path to profitability for Paytm.

This type of IPO “reminds a new generation of investors that there are risks,” Gokhale added.

Speaking to CNN last week, Paytm CEO Vijay Shekhar Sharma acknowledged the poor performance of his company’s IPO and said that if he had waited to announce a few more quarterly results, “our execution plan would bring comfort to many more people. “.

Paytm “is a new business model for many investors in the public market,” he told CNN’s Julia Chatterley, adding that the numbers for subsequent quarters “will explain this much better.”

“I would say it is too early to say that we would not be profitable,” Sharma added. “Our numbers and income will do the job of talking.”

– Diksha Madhok contributed to this report.

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