BackPaytm founder Sharma’s shares to vest only after market cap tops IPO level
The Paytm stock has been hammered since it listed on the bourses in November last year at an IPO price of ₹2,150. At the IPO price, Paytm had a market capitalisation of nearly ₹1.4 trillion, which is now down to ₹41,592 crore
PremiumMUMBAI: Vijay Shekhar Sharma, founder and chief executive of financial services technology firm One97 Communications Ltd that runs Paytm, said on Wednesday that his stock grants would vest only when the company's market capitalisation 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 letter to shareholders. “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."
The letter was notified to the stock exchanges along with Paytm’s quarterly update on operating performance.
Sharma expects Paytm to be operationally profitable by September next year. His comments on the company’s path to profitability and business growth numbers pushed up the Paytm stock nearly 5% on the BSE. At 1205pm, Paytm shares traded at ₹638.70 a piece, up 4.9% from its previous close.
The Paytm stock has been hammered since it listed on the bourses in November last year at an IPO price of ₹2,150. At the IPO price, Paytm had a market capitalisation of nearly ₹1.4 trillion, which is now down to ₹41,592 crore. Paytm also lost its tag as the most-valued startup in India and the most valued fintech startup in India, and it now trails RazorPay in the fintech space in terms of valuation.
Public shareholders have raised concerns over the company’s path to profitability as it is yet to report a net profit. Paytm's net loss for the quarter ended September widened to ₹473 crore, even as it reported a 64% year-on-year growth in its operating revenue. In the December quarter, net loss worsened to ₹778 crore despite a 90% jump in revenue.
Many global and domestic brokerages have advised against buying Paytm shares and have slashed their target prices on the stock. For instance, in a recent report, Macquarie Group slashed Paytm’s 12-month target to ₹450 a piece from ₹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.
It had said 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 have been trading significantly below their IPO prices. This has also led to many startups push back their listing plans despite having filed draft papers with the markets regulator.
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