Paytms crossroads: an analysts dilemma

Title

Paytms crossroads: an analysts dilemma

Creator

Simon A.E.; Ramesh L.

Description

Learning outcomes: This case study enables participants to:??To understand the fintech landscape in India and assess how market dynamics can impact Paytms valuation.??To evaluate the drivers affecting the value of Paytm and arrive at Paytms valuation.??To critically appraise the investment decision made. Case overview/synopsis: Rajani Chandran, a seasoned financial analyst, relooks her recommendation of Paytm in light of the recent revocation of its Payment Bank License. Paytm, the flagship service of One97 Communications Ltd., a financial technology company, is a pioneer in the Indian digital payments and financial services market. However, the developments post going public in 2021 were not always favorable. The frequent fallout with Reserve Bank of India brought restrictions on onboarding new customers and ultimately the revocation of the license. This drastic move is of huge concern to those who have invested in the company. Thus, given this backdrop, Rajani initially explored the dynamic landscape of the Indian digital payments and fintech industry, considering macroeconomic factors, competition and regulatory dynamics. She delved into Paytms financial performance to gauge its position in the market. The next phase of the careful scrutiny involved arriving at the equity value of the venture using the discounted cash flow model. Finally, Rajani critically appraised the drivers of valuation, incorporating both quantitative and the story she has crafted around Paytm. Consequently, participants in this case study are prompted to evaluate Paytm and arrive at a valuation and furnish a comprehensive recommendation based on their analyses, thus understanding the intricacies of evaluating a fintech company with immense potential. This case study serves as a valuable resource for students seeking to comprehend the complexities of financial analysis and valuation within the context of a dynamic and evolving industry landscape. Complexity academic level: The case is best suited for a course on Financial Statement Analysis while discussing how the financial statements of new-age tech companies can be analyzed and Business Valuation while introducing DCF valuation. The case serves as a comprehensive example of the multifaceted challenges and considerations that a buy-side analyst should have while valuing a company and pitching an investment within the fintech industry. Designed for second-year MBA students, the case assumes familiarity with financial reporting and strategic management concepts such as Political, Economic, Social, Technological, Legal and Environmental (PESTLE) and strength, weakness, opportunity and threat (SWOT) analyses and Business Canvas Model. Supplementary material: Teaching notes are available for educators only. Subject code: CSS 1: Accounting and Finance. 2025, Emerald Publishing Limited.

Source

Emerald Emerging Markets Case Studies, Vol-15, No. 1, pp. 1-24.

Date

2025-01-01

Publisher

Emerald Publishing

Subject

Business valuation; Discounted cash flow; Finance companies; Financial investment; Financial modeling; Fundamental analysis; New-age tech companies; Payments; Regulations; Value creation

Coverage

Simon A.E., School of Business and Management, Christ University, Bangalore, India; Ramesh L., School of Business and Management, Christ University, Bangalore, India

Rights

Restricted Access

Relation

ISSN: 20450621

Format

Online

Language

English

Type

Article

Identifier

https://doi.org/10.1108/EEMCS-08-2024-0333

https://www.scopus.com/inward/record.uri?eid=2-s2.0-85216958139&doi=10.1108%2fEEMCS-08-2024-0333&partnerID=40&md5=9e0ce85f350abbf23bd6772eed56ddf0