‘Talk less, focus on profit’: NYU prof has an advice for this Indian billionaire

Paytm dropped the ball on its initial public issue last month, making a lacklustre debut at the stock markets. Almost a month after the IPO failed to reach its desired historic value, a professor from New York University has now offered some advice to the founder and CEO of the fintech platform: talk less and focus more on profitability.

Aswath Damodaran, Professor of Finance at the New York University (NYU), suggested that Paytm's top management should focus on improving the “abysmally low” revenues of the company.

Damodaran did mention that it was too early to conclude whether there is a company-CEO mismatch

“It is still too early to conclude that there is a company/CEO mismatch, but if I were the top management of the firm, I would talk less about users and gross merchandise value, and focus more on improving the abysmally low take rate at the firm,” said Damodaran, popularly known as Dean of Valuation, in a recent blog post.

Take rates refer to the percentage of gross merchandise value that a fintech platform or merchant collects as its revenue. Paytm's take rate has indeed dipped from 2.18 per cent in 2017 to 0.79 per cent in 2021, as per analysts.

Meanwhile, the company invested its energy in adding users and services, as Damodaran pointed out in his blog.

Back in November, Paytm was listed on the stock exchanges for a price of ₹2,150 per share, but the scrip saw its value sharply plunged to ₹1,271 within days. Paytm share currently oscillates between Rs12,00 and ₹1,500.

“I valued Paytm at about ₹2,200, but in telling that story, I noted one big area of concern with existing management, that seemed to be more intent on adding users and services than on converting them into revenues, and pre-disposed to grandiosity in its statement of purpose and forecasts,” Damodaran wrote.

The NYU professor also noted that comments by Sharma and Paytm spokesperson became a hindrance for its IPO.

“It is always dangerous to try to explain why markets do what they do over short periods, but I do think that the company's founders and spokespeople did not do themselves any favors, ahead of the IPO,” he saod.

“Specifically, if you were concerned about Vijay Sharma's capacity to convert the promise of Paytm into eventual profits, before the IPO, you would have been even more concerned after listening to him in the days leading into the IPO,” he added.