Indian Fintech Startup Ecosystem in troubled waters soon? – #3 by Prakashsingh – Startups & Fintech – Trading Q&A by Zerodha

Let’s be very honest, those who have been in trading circles for years must have seen thousands of research reports from many organizations while tracking their sites primarily and for research purposes. Counter movements in most cases.

Research reports that provide the view in advance and follow up with an update (the right or wrong view is secondary) are worthy of respect.

One such report recently that has helped a lot of new investors is the Macquarie report. Macquarie has published a report on the start of an offer to sell on Paytm with a target of 1240 on the listing date. After achieving the 40% goal! In less than two months, they recently launched a follow-up report on Paytm with a target price of 900.

Some key points from the last report:

  • The digital payments regulations recently proposed by RBI could have a negative impact on a company’s payment business.

  • Paytm’s entry into insurance is not accepted by the insurance regulator which makes the prospects of getting a banking license more difficult.

  • Diminishing senior management is also a cause for concern.

More on this:

What after Paytm?

After a 40% drop from the listing price in less than 60 days, at current prices, the stock is valued at $10 billion. With lower targets expected by institutions like Macquarie citing concerns about the business model and other headwinds, it will take a daunting task to get to the initial listing price first.

With the valuations of most fintech startups already at astronomical levels, any drop of this magnitude at a company like Paytm certainly points to a troubling case going forward in terms of how they evaluate themselves and raise money. There is one thing I would totally bet on – the current trend of astronomical valuations for most FinTech companies in India with very little to show in terms of actual performance and sustainable profitability is not going to last for long.

At the end of the day, no matter what companies say about their business models, what matters is the value they create and more importantly, how profitable they are while creating that value for stakeholders.

Let’s hope the mind (when it comes to valuations) will return to the startup ecosystem soon in a way that is less harmful than what some listed companies across the world and India are currently going through.

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