On paper, it was Paytm’s 22nd annual general meeting (AGM) on Friday (August 19). But the first after it listed on the bourses in November last year when the fintech unicorn’s Rs 18,300 crore public offer was the biggest in India’s corporate history at the time.
Almost a year down the line, the sheen has worn off from the fintech company’s top-tier valuation.
Its stock is down 64 percent from the initial public offer pricing of Rs 2,150 apiece amid a global meltdown in tech valuations. In March, its payments bank arm was barred from taking on new customers by the RBI on concerns about how customer data was being managed. Analysts and investors flayed the company for large share-based payments to top management and little profits to show for it. An unfortunate incident involving its employees happened where the QR codes of its peer PhonePe were set on fire.
The most concerning thing perhaps was the opposition to Paytm founder Vijay Shekhar Sharma’s reappointment as the chief executive officer for another five years. While the company has not yet revealed which way investors swung on the matter in its AGM vote, three proxy advisory firms advised against his reappointment and remuneration.
Such a long list of problems might make many a CEO jittery while taking questions from investors at a public forum. But, one can hardly say that these things bothered Sharma too much during the AGM.
Of course, shareholders asked difficult questions about profitability and share prices. Some shades of anger and disillusionment with the company's stock market misfortunes were visible. One investor said he felt that he had been cheated. Another was angry at investment bankers for setting wrong expectations with the IPO pricing.
However, the Paytm founder seemed at ease while answering the questions. Unlike several CEOs of recently-listed tech startups who let their C-suite lieutenants deal with most questions during earnings calls, Sharma was the one to field most shareholder doubts about the business model and the stock price.
In line with his characteristic demeanour at public forums before the IPO, he used the digital under-penetration and large size of the Indian market as a template to answer questions about the company’s future. Again and again, he thanked board members and shareholders for their support.
There was also praise for the management from the investor end. One of them congratulated the founder for having a heart of gold. Another expressed pride in the apparent ubiquity of Paytm devices and QR codes everywhere.
“Har ghar tiranga, har haath mein Paytm,” he declaimed. (A tricolor in every household and Paytm in everyone’s hand).
The tough questions
Despite Sharma’s assurances that the company will achieve EBITDA profitability by September 2023, the shareholders were not convinced. With the share price taking a beating and Macquarie still maintaining its target price at Rs 450 per share, shareholders had a lot of questions about how the company will break even.
Many even questioned how the stock was priced so wrongly during the listing, a decision that has proven costliest to retail shareholders.
“You (management) take home big salaries. Every home uses Paytm. How can a company still run on losses then? It's very unfortunate when the share price falls by half,” said a shareholder.
Another accused the company of cheating retail investors instead of driving growth by cutting down large salary cheques.
“Everyone who purchased shares during the IPO is cursing the management. I do not think the company can achieve profitability even in FY24,” he said.
That said, there was no lack of sympathy for Sharma with many siding with him saying that falling share prices are not under the management’s control.
“You would have priced the IPO based on recommendations from advisors. But my concern is there should be some protection for retail investors. Advisors should be penalised. You are not at fault. The advisors gave you the wrong price,” said a shareholder.
According to another shareholder, “Humare management ka dil saaf hain. Shareholders ko himmat rakhni chahiye.”
Of the future
The management’s biggest priority perhaps became clear when an investor asked about the company’s expansion to foreign territories. Sharma was quick to boast that Paytm’s technology was world class and it was one of his ambitions to build a company that can compete with the best globally.
However, he maintained that the fintech’s immediate goals were to grow in the Indian market and generate profits for shareholders.
"The tech we are making is world-class. Our plan is to make India business profitable and generate free cash flows. Expand brokerage, and insurance. And then we will think about going into international markets," said the Paytm CEO.
The company’s chief financial officer Madhur Deora said that the company spends Rs 600 crore on tech every year, besides Rs 4,000 crore on employee-related costs.
To a question about the company’s thinking on inorganic growth, the management said that there were no large acquisition plans in the near future. The company wants to grow by building for scale and not by aggregating scale by buying other companies.
At the end of the AGM, Sharma thanked his board members for joining in the wee hours of the morning from the US. And then he paused for a moment.
“Jaate jaate aur ek sawal ka jawab de deta hoon,” he said. (Let me answer another question before signing off.)
As the shareholders were divided in asking for a physical AGM the next time and saying that the event must remain virtual, Sharma played to both sides of the gallery and told the online audience that the next meeting would be both physical and virtual. “It will be hybrid,” he said as the curtains fell on the first annual gathering of India’s biggest fintech unicorn.
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