Why private market investors aren't too worried after Paytm's tepid IPO

Private market investors look at Paytm's performance in the public markets as a course correction for valuations in the ecosystem.

Friday November 26, 2021 , 3 min Read

Good Morning,

The Indian startup ecosystem’s momentum in lining up one initial public offering (IPO) after another was broken by Paytm's tepid response on the stock markets that gave other companies pause — with online payment and lending firm MobiKwik delaying its IPO.

However, private market investors don't seem to be too concerned about the course correction as they believe this will lead to a ‘flight to quality’. Private equity and pre-IPO funds believe that Paytm’s performance on the public markets will lead to the tempering of valuations, with startups like Mensa Brands and Apna being valued at $1 billion in six months and less than two years respectively.

“Given that our pre-IPO fund life is of five years, if we feel the valuations in the private market are too high, we will slow down the pace of investments but we will continue to evaluate companies,” Anshu Kapoor, President and Head of Investment Management at Edelweiss Wealth Management, told YourStory.

“Fintech as a sector includes online brokers, insuretech, digital lenders, payment gateways, neobanks, and others. We are waiting for the right set of winners to emerge. There is very little differentiation and some consolidation will happen in the space,” said Siddharth Mehta, Founder and CIO at public markets fund Bay Capital Partners.

However, there's light at the end of the tunnel. For the third consecutive day, Paytm's shares continued to strengthen, with the stock opening at Rs 1,766.7 apiece. Existing investors — BlackRock Inc and Canada Pension Plan Board — also increased their shareholding in the company.

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