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Only aggressive investors should stay invested in Paytm, other fintech companies available at reasonable valuations: Swastika Investmart’s Santosh Meena

Santosh Meena, Head of Research at Swastika Investmart, said Paytm is continuing its southward journey after listing on the back of liquidation by retail investors, who were betting for a listing gain however there is a lock-in period of 30 days for anchor investors. “If we talk about the future outlook then it is still erratic because the market is not clear about its core business and timing of profitability,” he said. 

“We know that the digital economy is witnessing exponential growth across the globe, where India is in a leading position. The startup ecosystem is changing in India and many people think that India has the potential to produce big tech companies like what the US and China did in the past, therefore there is a frenzy for new-age businesses’ IPOs in India and most of the promoters want to cash out this euphoria with unrealistic valuations but in reality, only one or two companies will survive and create wealth for investors while others will be wealth destroyers,” he said.

“Paytm comes out with exorbitant valuations where it was asking a market cap of Rs 1.4 lakh crore against revenue of Rs 3,000 crore. While Bajaj Finserv, which is an already listed fintech company with a proven track record of continuous profit and growth, is trading at a market cap of Rs 2.9 lakh crore against revenue of Rs 63,000 crore,” said Meena. 

“Paytm disrupted the payment industry post-demonetisation but got disrupted by UPI. The biggest strength for Paytm is its massive customer base along with strong brand positioning however there is no clear moat with low entry barrier businesses. The market will watch how Paytm will use its strengths to enter into new businesses or create a moat, and if it manages to emerge a leader in a particular business, we can expect buying interest from lower levels. Otherwise, it may take many years to reach its peak valuations… I still have the same view that only very aggressive investors should stay invested in the company while others should look at exit opportunities at any pullback. There is no apple to apple comparison for Paytm but there are better-listed fintech companies that are available with reasonable valuations with a certainty of growth,” he added.