Vijay Shekhar Sharma Regrets Banker Selection for Paytm IPO Amid SEBI Investigation
Vijay Shekhar Sharma, the founder of Paytm, has publicly expressed his regret over not selecting the right bankers for his company’s initial public offering (IPO) in November 2021. His statement comes amidst the backdrop of the Securities and Exchange Board of India (SEBI) issuing show-cause notices to him and other Paytm board members for alleged misrepresentation of facts during the IPO process and non-compliance with classification norms.
Speaking at Tie Delhi NCR’s India Internet Day 2024 on September 27, Sharma admitted, “I have been an entrepreneur long enough now. I have a regret of not choosing the correct bankers for the IPO.” Using a metaphor, he explained, “To enter the temple of God, you need the right priest… perhaps we didn’t choose the right one.” This statement was followed by Sharma bowing before the audience, a gesture symbolizing the challenges and turbulence his company has faced since its IPO.
Sharma’s reflection on the past two years highlights the impact of selecting the right financial partners for such a significant milestone. He advised other entrepreneurs to be meticulous in choosing their bankers, emphasizing that the choice can have long-term consequences.
The regret is magnified by the significant decline in Paytm’s share price since its IPO. The stock has lost nearly 60 percent of its value since listing, despite the broader market experiencing a bull run, with IPOs frequently debuting to overwhelming demand. “Nowadays even small IPOs get so big,” Sharma remarked, alluding to the strong performance of many recent mainboard and SME IPOs.
Sharma’s statement also coincides with SEBI’s ongoing investigation into Paytm. The market regulator has issued notices to Sharma and Paytm’s board members over allegations of misrepresentation of facts during the IPO and non-compliance with shareholder classification norms. These notices are based on inputs from the Reserve Bank of India (RBI), which had examined Paytm Payments Bank earlier in the year. Central to the investigation is whether Sharma should have been classified as a promoter, given his management control rather than an employee role, during the IPO filing.
Paytm has responded to these developments by stating that it is in regular communication with SEBI and is making necessary representations regarding the matter. The company’s Draft Red Herring Prospectus (DRHP) listed several investment banks, including Morgan Stanley, Goldman Sachs, Axis Capital, ICICI Securities, JP Morgan, Citi, and HDFC Bank, as managers of the IPO. Despite these prestigious names, the stock debuted below its issue price in November 2021, with shares dropping to Rs 1,560.80 on the NSE, significantly lower than the final issue price of Rs 2,150.
Reflecting on his entrepreneurial journey, Vijay Shekhar Sharma also recalled the difficulties he faced in securing funding during the early years of Paytm. “I did not get VC luck till 7 years of my company starting. My Series A happened in 2007 while I started the company in 2001,” he said, highlighting the challenges of being a bootstrapped entrepreneur. Vijay Shekhar Sharma shared that the necessity of generating cash on his own taught him the critical lesson that “there is nothing called P&L. The real truth is cash, everything else is trash.”
This candid admission from Vijay Shekhar Sharma sheds light on the often arduous path entrepreneurs must navigate, particularly in the technology and financial sectors. His experiences underscore the importance of strategic decision-making and the long-term impacts these decisions can have on a company’s success and stability.
The Paytm IPO saga serves as a cautionary tale for other entrepreneurs and companies planning to go public. The choice of financial partners, the accuracy of disclosures, and adherence to regulatory norms are critical components that can determine the outcome of an IPO. Vijay Shekhar Sharma’s regret and the subsequent challenges faced by Paytm highlight the complexities involved in these processes and the need for thorough preparation and due diligence.
As Paytm continues to navigate these challenges, Sharma’s insights and experiences will likely serve as valuable lessons for the broader business community. His openness about past mistakes and the emphasis on learning from them is a testament to the resilience required to lead a company through turbulent times. Moving forward, the focus will be on how Paytm addresses the regulatory concerns and rebuilds investor confidence in its long-term vision and growth potential.