Paytm is believed to be the handiest and most frequent business that was relevant to utilize two individuals as an Internet banking service. Paytm has a brand IPO of 15,000 crores, making it India’s largest ipos in fear of coal India. Paytm was considered to have a bright future, however, it lost money and its IPO collapsed. People who invested in the Paytm IPO face a 70% to 75% loss. The following are some of the reasons for Paytm’s failure.
- RBI prohibition: Paytm banking payments is one of Paytm’s largest ventures, and it is the one through which Paytm has earned crores of profit in recent years. But following the RBI ban till the RBI removes this ban from Paytm it is unable to attract new customers to Paytm Payments Bank. As a result, its profit and business flow are restricted. The RBI restricted seeing several substantial supervisory issues at Paytm Payments Bank. The bank is taking quick action to comply with the RBI’s directives, including the hiring of a reputable external auditor to perform a full system audit of its IT systems. Although this ban does not affect current customers, it has restricted Paytm’s business expansion to some extent.
- Consumption habits: Despite the RBI’s prohibition, investors and customers continued to invest in Paytm shares. The reason for this is that Paytm has influenced consumer behavior. We are changing our habits as the day’s pass, and we transition from a cash-based to a cashless economy. This is not only a handy but also a safe option. As a result, customers anticipate that in the long term, online banking sectors such as Paytm would provide bigger returns and profit margins. As a result, despite the restriction, they invested in Paytm and have suffered significant losses as a result of this transaction.
- Unjustified pricing: When Paytm announced its IPO, the firm valued itself at 1.39 lakh crore rupees. Otherwise, its income was merely 3300 crore. The large disparity between firm valuation and revenue is a highly alarming sign. If you find the value-to-sales ratio, in this case, you will see that it is far greater. Thus, for Paytm to provide guaranteed returns to its investors, the team would have to make 400% more than its current profit. Making a profit of 400% each year is almost unachievable and cannot be achieved in any business. If we look into Paytm’s history and background, we can see that it has only met 15% of its growth targets over the last five years.
- Data corruption: All of the financial data that Paytm has acquired over the years has now been made available to all other mobile networking apps and firms. This was done following RBI norms. The RBI has stated unequivocally that any app or firm that gathers financial data on customers is available to all other competing enterprises and may be accessed openly by anyone. As a result, the knowledge valuation that Paytm’s brain has is likewise useless in today’s circumstances.
The decline of Paytm’s IPO was caused by a misunderstanding about default value and the misdirection of two large users. Analysing before investing in new ipo listing, is very much important for people to enjoy great returns. Any company’s reputation for making similar errors would result in the same predicament, which is not at all desirable.