Paytm Founder Vijay Shekhar Sharma Regrets Choosing Wrong Bankers!

At the India Internet Day 2024, Paytm founder Vijay Shekhar Sharma candidly went on record to admit his biggest regret  – namely, bankers for Paytm’s IPO. “We chose the wrong banker!” is what Sharma declared in response to this critical importance this aspect tended to hold in the overall entrepreneurial journey. His frank admission throws a spotlight onto the intricacies and the high stakes involved in taking a company public and especially in our country’s dynamic financial market.

Sharma’s words weigh heavily, especially as a result of the endless list of the big names that managed Paytm’s IPO. Lead managers included Axis Capital Limited, Citigroup Global Markets India Private Limited, Goldman Sachs (India) Securities Private Limited, HDFC Bank Limited, ICICI Securities Limited, JP Morgan India Private Limited, and Morgan Stanley India Company Private Limited-an endless list of the world’s premier finance institutions. Despite such a fabulous cast, remorse from Sharma implies that even in the hands of first-class banking institutions, the IPO process could be a tricky affair and may even throw up surprising results.

The Paytm IPO, for instance, floated on November 18, 2021, is one of the most eagerly awaited public offerings in India in recent times. It failed to live up to the hype right from the word go. The shares of One97 Communications, the parent of Paytm, traded at a discount of 9% from the issue price of ₹2,150. At the close, the stock had performed relatively much worse to the original price, closing at ₹1,564.2 on the Bombay Stock Exchange (BSE), down by an astonishing 27.2% from its original issue price. The lackluster performance has been so much more disappointing given that the IPO had fetched an oversubscription of 1.9 times, signifying that investors were keen during the IPO itself.

Looking back, Sharma could not help but draw a comparison with Infosys-those success stories regarding India’s own IT companies. “In NR Narayana Murthy’s time, his driver made ₹1 crore, but when Paytm listed, at least 20 people made ₹100 crore.” This again goes on to show that the IPO of Paytm itself created scale wealth, surfacing even after a disappointing market debut. But Sharma’s remorse implies that, had the right bankers guided him well, the result could have been much better.

Candid confession by the founder comes at a time when Indian stock markets are on a bull run with IPOs debuting nearly every day to overwhelming demand. “It now becomes so oversized, even for smaller IPOs,” said Sharma, referring to the high subscription rates and listing gains many mainboard and SME IPOs have gained in recent times. Such a background alone makes Paytm’s muted outing all the more glaring with the firm’s share price having lost over 60% of its listing value.

SEBI’s Issue With Paytm –

Paytm’s post-IPO journey has, though, become a complicated ride with some fresh regulatory woes. The show cause notices issued to Sharma and other members of Paytm’s board relate to the alleged misrepresentation of facts in the IPO process and non-compliance with norms relating to the classification of shareholders. These notices specifically relate to Sharma’s alleged non-compliance with norms relating to the classification of promoters, which SEBI noted only after it was shown by the RBI that the latter had examined Paytm Payments Bank earlier.

The core issue in the case involves whether Sharma should be considered a promoter, as he has exercised management control, and not an employee for the purpose of IPO documentation. The characterization underscores the intricacies of the regulatory system companies must navigate when going public and how what at first appears to be purely technical matters and details can prove all the difference.

Paytm has responded to these regulatory concerns by stating that it keeps in continuous communication with SEBI and presents representations whenever and wherever necessary. The dialogue between the company and the market regulator is a culmination of continued examination of listed entities, and their word is the epitome of transparency and compliance on all issues of corporate governance.

Sharma’s reflections during India Internet Day 2024 were not only a conversation about how he and the team reached the IPO milestone. There was also the talk about the history of becoming an entrepreneur, his experience in raising venture capital for One97. 

“I did not get VC luck for seven years after starting One97,” revealed Sharma. It showed that perseverance sometimes comes before skeptical eyes and investor attention. What does this reveal? A glimpse at the not-so glamorous side of entrepreneurship-persistence and bootstrapping comes before the glamorous results.

This makes the experience of the Paytm founder tell the world once again: cash is king. “There is nothing called P&L. The real truth is cash, everything else is trash!” Sharma declared when underlining that a company’s ability to generate and manage cash flow is something paramount to its survival and growth. 

He noted how, as companies mature, the focus invariably shifts to cash metrics, reflecting the evolving priorities of businesses as they scale.

Sharma’s Personal Mission With Paytm –

Sharma’s journey with Paytm was not about building an entrepreneurial success story. He had undertaken a personal mission to solve a real-world problem. “Digital payments were a native need for me. As a street foodie, I needed to solve it for the last vendor,” he explained. 

The anecdote tells you how Paytm’s solutions are positioned so that they resolve grassroots-level economic challenges in India such that even the smallest of vendors can have digital payments.

Its rise to prominence is closely tied to one salient event in Indian economic history: demonetization. 

“Every product has a right time,” Sharma conceded, adding, “We took 17 years of entrepreneurship to know the moment it was going to be.” 

“Paytm wouldn’t have become what it is without demonetization,” he said, showing how such an external factor sometimes brings companies to such heights and market orientations that might not seem immediately connected to an organization’s strategy.

Despite the difficulties and regrets, Sharma had a message of hope for future entrepreneurs. “When you are pushed down and down, you realize you can fly again,” he said, summarizing the resilience needed to navigate the ups and downs of building an enterprise. It is this attitude that encapsulates the larger narrative of Sharma’s entrepreneurial journey: full of early challenges, influxes of break-through and persistent problems.

The Paytm’s story as told by Sharma, teaches several extremely crucial lessons in entrepreneurship that apply to investors, as well. It shows why choosing the right partners at the time when the event chosen is a major one such as an IPO is so critical. Right guidance makes all the difference when it comes to how a company is valued as well as viewed by the market.

Market reaction is unpredictable even for well-telegraphed IPOs. While Paytm’s IPO attracted tremendous interest and oversubscription, its post-listing performance recalls some of the more cautionary tales in public market dynamics.

The experiences of Sharma underline regulatory compliance and the transparent nature of corporate governance. The running debate over shareholder classification with SEBI goes on to exhibit how the intricacies of technology, which could be contained within the procedural detail of regulatory filings, affect a corporation and its administration.

Paytm’s journey shows how perseverance in entrepreneurial endeavors has far-reaching impact. While waiting for seven years for venture capital to finally come around, when financing finally did come, Sharma saw the company catapult to fame during demonetization by sheer adaptation.

Finally, cash flow is recalled for its prominence as the best measure of a firm’s health or healthiness; hence Sharma brings to mind key elementary business truths. An age in which growth and valuation statistics periodically dominate all other concerns, this puts one firmly on the ground when thinking about what runs businesses.

Naturally, the lessons from Sharma on the Paytm journey since it became public reflect well onto the post-IPO journey of climbing the next rung on the scaling ladder and going from being a pure startup to a publicly traded entity. Candid admissions by Sharma of regrets and lessons learned add nuances to the entrepreneurship scenario in the fast-changing and rapidly growing digital economy of India, where everyday there’s a new IPO in the market.