Let’s be brutally honest, Those who are in the trading circles for years must have seen thousands of research reports from many institutions while tracking their positions primarily and for research purposes and more often than not, These reports are mostly reactive in nature and have a lagging effect thereby resulting in contra moves in most of the cases.
Research reports which give the view beforehand and follow it up with an update (right or wrong view is secondary) are the ones which deserve respect.
One such report of late which has helped a lot of new investors is the one from Macquaire. Macquarie published a report initiating sell view on Paytm with target of 1240 on the date of listing. After achieving the target of 40%! In less than 2 months, They have recently initiated a follow up report on Paytm with a target price of 900.
Some key Takeaways from the recent report :
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RBI’s recently proposed digital payments regulations can possibly create a dent in Co’s payment business.
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Paytm’s foray into insurance was not accepted by the Insurance Regulator which makes the prospects of getting a banking license even more tougher.
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Senior Management Attrition is also a cause of concern.
What Next for Paytm ?
After a fall of 40% from listing price in less than 60 days, At current prices, the stock is valued at $ 10 Billion . With lower targets being predicted by institutions like Macquarie citing concerns about the business model and other headwinds, It would require an herculean task to reach the initial listing price first.
Indian Fintech Startup ecosystem - Tough path ahead ?
With valuations of most of the fintech startups already at astronomical levels, A fall of this magnitude in a company like Paytm definitely signals a worrying situation going forward with respect to how they value themselves and raise funds. One thing that I’m absolutely willing to bet on - Current trend of astronomical valuations for most of the fintechs in India with very little to show for in terms of actual performance and sustainable profitability is not going to last for too long.
At the end of the day, No matter what companies say about their business models, What matters is what value they are creating and most importantly, how profitable they are while creating this value to the stakeholders.
Summary
Let us hope that sanity (when it comes to valuations) returns to the startup ecosystem soon in a less harmful manner than what some of the listed companies across the globe and India are going through currently.