Friday, November 19 2021

Dive In


We won’t be mute spectators to what has been happening.

That’s the president of a gurudwara committee in Gurgaon explaining why his organisation has opened the doors of the five gurudwaras it administers for namaz. The Sikhs took this decision in response to a campaign to stop Muslims from offering Friday prayers in public spaces (explained here). They are joined by a Hindu businessman who has offered his empty shop to the community as well: “I offered the place in a heartbeat, and I will continue to do so today and tomorrow, again and again.”

Stuff to check out: The latest episode of the splainer podcast ‘Press Decode’ features an excellent discussion of the Muslim=meat stereotype and the unique success of Nykaa. Be sure to head over to the IVM website, Spotify or Apple Podcasts to listen to it.

Big Story

The downward plunge of Paytm

The TLDR: Shares of one of India’s best known digital payments companies fell sharply on the first day of trading after its lacklustre IPO. Here’s a look at why that happened—for those of us who don’t obsessively track the stock market everyday. This is basically an old-fashioned tale of hubris.


Remind me about Paytm…

It is the best known digital payments company in the country. All of us have used the service at some point, or seen signs for it at shops we visit. Its parent company is called One97 Communications Ltd—which debuted on the stock market this week.


The founder: Vijay Shekhar Sharma’s story reads like a tech startup fairytale. The son of a school teacher, he grew up in Aligarh—and studied engineering in New Delhi,  “where he taught himself English by listening to rock music and reading text books with their Hindi translations.” 


In 2000, Sharma launched his first business called One 97—a text-based people-search service—its name inspired by 197 is the number for phone inquiries. The next year, he launched Paytm—shorthand for Pay Through Mobile—which allowed you to top up the balance on your prepaid mobile phone, and became a digital wallet service in 2014. 


The Paytm story: The company’s meteoric rise was fuelled by two key factors. First: the surge in the use of mobile phones in India—as they became increasingly cheaper. Second: Demonetisation. With the government pivoting hard toward digital payments and away from cash, Paytm became the hottest bet in the market. Interesting nugget to note: 


“It famously courted controversy by taking out full-page advertisements with the Prime Minister’s photograph welcoming the decision to shred 8% of all the currency circulating at that time and had to apologise for the unauthorised use of Modi’s picture.”


The numbers: The company currently has 337 million users and it is the market leader in what insiders call the P2M (person to merchant) market—where a person uses a digital payment service to pay a store etc. It has 50% of that pie. But for all that, it has not turned a profit as yet. The company has posted losses for eight straight years—most recently reporting a loss of Rs 3.82 billion (382 crore) on revenues of Rs 8.91 billion (891 crore) in the first quarter ended June 30. 


Point to note: Paytm’s biggest shareholders are foreign investors like Japanese SoftBank, China’s Ant Group and Warren Buffet’s Berkshire Hathaway. Ant, Alibaba and SAIF Partners (a Hong-Kong based private equity firm) collectively own more than 50%, with Softbank as the next largest investor with 18%.


Ok, so what happened…

Paytm’s IPO came on the heels of blockbuster performances of other startups like Zomato, Nykaa and PolicyBazaar. But unlike the rest, it was very slow off the block. The big investors were slow to snap up the shares allotted to them—and the shares were not fully subscribed until the third day. Institutional investors were already expressing doubts in the lead up to the IPO—and that skepticism bore fruit yesterday on the first day of trading:


  • The stock price plunged 27% from Rs 1,950—already offered at a 9% discount on its issue price of Rs 2,150—to Rs 1,564.15 at its lowest. 
  • It was the worst first day performance for an Indian unicorn—valued at Rs 1 billion (1,000 crore) or more. The record was previously held by Coffee Day which debuted in 2015!
  • Trading was halted when the downward plunge hit a circuit breaker—which kicks in when the newly listed stock dips or rises by 20% from its opening price to give investors and the market to cool down.
  • While Zomato’s share price surged 65% on debut, and Nykaa rose by 79%, Paytm wiped off more than double the money it raised through its IPO worth Rs 183 billion (18,300 crore).
  • Based on current share price, the company is worth Rs 1.01 trillion (1,01,399 crore or $13.6 billion)—which is seriously lower than the $16 billion valuation it received when it last raised investor funds in November 2019.


Why, what’s the problem with Paytm?


Headlines that matter

Farm laws have been repealed

The government has taken everyone by surprise and announced the repeal of the farm laws—a demand it has steadfastly resisted for over a year. The Prime Minister doled out the surprise gift for farmers in an address to the nation on the occasion of Guru Nanak Jayanti—and in the run up to the Punjab state elections, of course. In our democracy, none is mightier than the vote. Watch the key moment here.

Is that a ninth planet?

A newly published paper makes a case for the possibility of a ninth planet in our solar system. Based on observations made by the Infrared Astronomical Satellite (IRAS) back in 1983, it says the planet would be somewhere between three to five times the mass of the Earth—and would be orbiting the Sun 225 times the distance between the Earth and the Sun. Other astronomers remain skeptical. (Futurism)

A key Hollywood story 

Miramax is suing director Quentin Tarantino to stop him from selling NFTs based on his screenplay for ‘Pulp Fiction’. He was planning to auction seven scenes that never made the final cut, but the studio insists he had “granted and assigned nearly all of his rights” to Miramax in 1993. And the lawyers are getting ready for an ugly fight. In case you are confused about NFTs, check out our handy explainer here. (New York Times)


In today’s edition

Sanity Break

  • Rachita Vora’s mashup series ‘The Mumbaikar’ 


Weekend Advisory

  • Good stuff to watch this weekend
  • A list of good reads

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