PayTM (One 97 Communications Ltd)

Continuing with my attempts to gather tidbits of information on PayTM to build a better picture:

1. Based on limited interaction with PayTM employees/ex-employees, my take away is that company currently does not have what it takes to succeed as a financial giant in the medium to long term. Culture exhibited by top leader is still like that of startup and that of Lalla driven company (if i dont like you, you may be kicked out!). Attrition is very high at mid to higher management level on the financial side of business with a fair number of people quitting in less than a year. This will clearly hamper creation of necessary systems and risk frameworks for financial institution to survive the shocks and downside

2. For some strange reason (and I could be completely wrong here), I get a feeling that PayTM is considering to slow down and do a calibrated growth on lending for next 2-3 qtrs. This feeling was developed by reading a para in one of their press releases (released on 5th July) “Our focus remains on the asset quality by continuously reviewing with our partners cohort data and tightening credit policy wherever needed proactively. This reflects in the growth of value of loans distributed in the quarter.”
   Loan disbursal may show more growth during the festival season, but as mentioned in my earlier post unless they get more partners (and hence more money to loan) the explosive disbursal growth can slow down relatively.

3. Quantum of ESOP over next 3-5 years is another thing to factor in. I have not yet found all details on ESOP but it looks to be very high. If that is true, EPS dilution will continue for a medium term. Markets may ignore ESOP issues and ride high on “Adjusted Ebitda” during bull run but eventually it will factor it in long run (my personal view)

Just my 2 cents!

Disclaimer: Was invested for a short period, moved out as I found better medium term opportunity. Views can be biased and I am susceptible to errors of judgement and willful blindness. Please do your own due diligence on buy/sell decisions.