InvestorQ : Should I invest in Paytm IPO? Is the IPO overpriced? Why are large institutions showing so much interest in the Paytm IPO?
swati Bakhda made post

Should I invest in Paytm IPO? Is the IPO overpriced? Why are large institutions showing so much interest in the Paytm IPO?

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Sam Eswaran answered.
4 weeks ago
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Whether you should invest in the Paytm IPO or not would depend on your own financial goals. You should ideally talk to your financial advisor before taking the decision. However, here is why many of the large institutional investors like BlackRock and Canada Pension Fund are impressed by Paytm. These two and many more big names like ADIA, GIC Singapore are all participants in the Paytm IPO as anchor investors.

· Paytm had won millions of mobile users for its payment interface when the government demonetized currencies in late 2016. That had even induced Warren Buffet to take a stake in Paytm. However, there have been questions on whether the stock is still good.

· What has really appealed to the global audience is the massive customer footfalls of customers on its virtual stores. For example, Paytm has 33 crore registered customers and over 2.2 crore merchants on its platforms. In addition. Paytm has about 5.7 crore monthly users. However, its cash back scheme has come for severe criticism.

· The good news is that cost cuts have been drastic. In the past, it used to incur Rs.162 for every Rs.100 earned. Now it spends only Rs.73 for every Rs.100 earned. Due to additional overheads, it is not yet into profits but it is getting closer.

· Paytm is being looked as a game changer in the banking and payments space. It is giving a run for money to proprietary platforms and predatory pricing models being currently followed by many banks.

· In short, what the big ticket investors are betting on is that even a low-margin, high-volume business can create its own data moat. Digital payments can be the best platform to bring together millions of small traders and businesses.

One bet could be that Paytm and its payments bank would merge into a full-fledged, unrestricted lender, credit-card issuer and deposit taker. This is the model that has worked in countries like South Korea.

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