Research

Report
A proposal to perform a comparative study on the performance
of One97 Communications and PB Fintech Limited

PRESENTED TO
Dr Priyanka Gupta

PRESENTED BY

JANVI ARORA (2228323)

KSHITIJ RAI (2228326)
MAYANK KUMAR (2228334)
KULDEEP SINGH (2228327)
Title

Comparative study on the performance of One97 Communications (Paytm) and PB Fintech

Limited

Problem Statement
Both Fintech IPO’s approach share values differently. Profit margins vary significantly between
companies. Paytm’s overall performance will be compared to PB Fintech Limited’s Initial Public Offering
in 2021, as well as the factors that contributed to price declines. The primary objective of this research is to
determine whether Paytm’s current gain percentage is lower than PB Fintech’s due to the issue size and
brand name, or if there are any other factors that contributed to Paytm’s massive loss following the IPO
release, as well as to analyse individual performance of both the companies.

Abstract
There are a greater number of Initial Public Offerings (IPOs) issued in FY2021. This study looks at
the Initial Public Offerings (IPO) of two Indian financial technologies (Fintech), One97 Communications
(Paytm) and PB Fintech Limited (Policybazaar), both of which generated a lot of excitement in the market.
The study’s goal is to assess the companies’ performance and determine whether the brand names and types
of services provided, in conjunction with the issue’s size and other relevant factors, create market
expectations. Data were gathered from a variety of credible secondary sources in order to perform statistical
calculations and pinpoint the exact cause of the problem statement. To determine the outcome of the
mentioned hypothesis, tests such as Analysis of Variance (ANOVA) and Chi-square were used. According
to the research results of the various analyses, both companies have shortcomings in terms of performance.
Based on the findings, we can conclude that PB Fintech performed better than Paytm.

Keywords: Initial Public Offering (IPO), performance, comparative study, Paytm, Policybazaar, issue size,
brand name, type of services

Literature Review
The history of initial public offerings (IPOs) is taken from the source (IPO Historic Table - IPO
Listing, IPO Market, IPO Issue, Subscription, n.d.), which provides information on the issue size, Qualified
Institutional Bidders (QIB), High Networth Individuals (HNI), and Retail Individual Investors (RII), The
IPO’s name, size, opening and closing dates, as well as the gain percentage, are listed. The paper
(Shiprapruthy & Kumar, 2013) provides a descriptive analysis on the performance of IPO’s in India with the
help of the FY2009 dataset. Paytm is one of the fast-growing start-up companies which launched the IPO in
a wide range and was most expected by the public. As per (Paytm IPO Date, Price, GMP, Review, Analysis
& Details, n.d.), The company launched its first digital payment in 2009. As per the headlines of (November
19 et al., n.d.), the price of the IPO was ₹2150 per equity share and the face value of ₹1 per equity share.
Investors, however, were disappointed. Due to the company’s high share valuation and lack of profits, the
stock dropped nearly 28%. Paytm’s IPO was a flop, and investors lost money on paper. Paytm’s fall erased
the company’s total market capitalization of Rs 38,000 crore on November 18, 2021. The journal written by
(Matharu, 2021) mentioned that before the Financial crisis, almost all the IPO’s were underpriced. When we
compare that with the Paytm, the entire scenario is changed since the value of the share was overpriced.
Thus the share value dropped suddenly. Even though the IPO was listed because of the expansion of digital
technology as per the review provided by the article (November 29 et al., n.d.). When we look at the PB
Fintech, the company has developed the world’s largest online platform for insurance and product
leveraging. The platform is frequently referred to as Policybazaar or Paisabazaar. The issue began on
November 1st and concluded on November 3rd, 2021. The issue was listed on both the National Stock
Exchange (NSE) and the Bombay Stock Exchange (BSE) on 15 November 2021 with a face value of ₹2.As
per their (PB Fintech Limited, n.d.), The article in (PB Fintech IPO Review (May Apply), n.d.), conveys that
PB Fintech Limited can be invested in at an early stage through the company’s Initial Public Offering (IPO).
An IPO investor can purchase PolicyBazaar shares prior to PB Fintech Limited's stock market debut by
applying for an IPO. Eventhough the Grey Market Premium (GMP) was not so good for PB Fintech, it has
become the first Fintech company to reach good position in borsus as per (Staff, 2021). The PB Fintech’s
price increased 20% higher than the IPO price in the share market and both the companies as per the report
from (Merchant, 2021), have mentioned to have a look at the US market since Fintechs’ performance is
better in the USA.

Research Questions
1. What are the various factors which made the companies to release the IPO?
2. How was the performance of both the companies after the release of the IPO?
3. Is there any chance for the companies to increase the gain percentage?
4. What are the techniques used for comparing both the opening and closing values?
5. Can both the Fintech’s sustain in the market?
6. What are the future goals of Paytm and PB Fintech Limited?
7. Can the future goals enhance the performance of the share value? Will the value increase or still
decrease specially Paytm shares?
8. Should Indian Fintech companies have an eye on the other countries’ Fintech sectors?
9. Is the Paytm IPO disappointing the other Fintech’s?
10. Will brand name play a major role during the IPO release?
Objectives
1. To identify whether the changes in the opening and closing values of the share price will impact the
future performance of the company or not.
2. To analyse whether the issue size have an impact on the opening and closing value of the stock.
3. To analyse the importance of brand name and the services provided for both the companies.

Hypothesis
Hypothesis 1
 H0: There is no significant difference between the opening and closing value of both the stocks.
 H1: There is a significant difference between the opening and closing value of both the stocks.
Hypothesis 2
 H0: The brand names (IPO names) with issue size, listing open, listing close value and current gain
percentage are independent to each other.
 H1: The brand names (IPO names) with issue size, listing open, listing close value and current gain
percentage are dependent to each other.

Research Design
The research type undertaken is an empirical research method where the result is proven by
statistical techniques. The data collection is done by compiling various secondary data which had already
been published in renowned websites. The methodology employed in this study entails the application of
analytical techniques such as Analysis of Variance (ANOVA) in order to determine the abrupt decline in
closing price following the IPO’s release. This approach identifies whether there is a material difference
between the opening and closing values of the share price along with volume size of the traded shares for the
first thirty days, which enables to pinpoint the cause of the share price decline. Comparing Paytm and PB
Fintech can also help identify any inconsistencies in the market for Indian Fintech companies’ Initial Public
Offerings. The Chi-Square test will be used to determine whether the issue size has an effect on the stock’s
opening and closing prices. The result indicates whether or not the brand names (IPO names) are dependent
on one another in terms of issue size, listing open and listing close values. To monitor the overall
performance of the shares and to ascertain their rise and fall, trend, common-size analysis and ratio analysis
will be performed followed by and a qualitative analysis, which includes trend-line comparison. The study is
expected to take one month to complete. One month would be more effective for performing an accurate
performance analysis and comparing the details. The result obtained provides calculation in the share price
range, which aids in determining whether the same set of ranges is repetitive over time. This can be
beneficial for determining the future value of shares and also for conducting a comparative analysis of the
two companies in the long run.
Data Analysis and Interpretation
Analysis 1: Significant changes in the opening and closing prices of shares
At first, as per the first hypothesis mentioned, data for regular opening and closing prices of stocks
were collected over a month via web sources such as (One97 Communications Limited (Paytm.Ns) Stock
Historical Prices & Data - Yahoo Finance, n.d.) for Paytm and (PB Fintech Limited (Policybzr.Ns) Stock
Historical Prices & Data - Yahoo Finance, n.d.) for PB Fintech. The goal of this analysis was to determine
whether the opening and closing prices had a significant change and, based on the results, whether the
values would continue to fall or not. Using the ANOVA test, the level of significance is fixed as 5% and the
level of confidence is fixed as 95%. The Anova Test Is Conducted to study the difference in the opening,
closing values and volumes of share prices since the date of IPO release for 30 days of time period.

Result 1

Figure (i): Anova result of PB Fintech and Paytm

Interpretation 1:
Based on the result obtained from figure(i), it is found that the p-value for PB Fintech is 0.002512 <
0.05 and for Paytm it is 4.8E-08 < 0.05. Hence it is proven that H 0 rejected for both the companies. Thus
there is a significant difference between the opening and closing values of the stock. When comparing the
betterness of the changes, the PB Fintech have lesser changes when compared to Paytm. This proves the
volatility of the stock for both the companies and thus can be inferred from the trend line. Being a start-up
company, the stability of share price cannot be expected at a very short duration. Hence the growth level for
both the companies depends upon the expansion path and strategies handled to improvise the business
model. Once the framework is decided properly, the market price of the companies automatically improves
providing better Return of Equity and Dividend Yield.

Analysis 2: The significance of brand name when issuing shares

 The second focus of the analysis was to identify the importance of brand name and to verify whether
the issue size have an impact on the opening and closing value of the stock. To test the second hypothesis,
Chi-square test was used.

Result 2:

X2 CAL 791.0787517
degree of freedom (df) 2
Chi square tabulated value X 2
tab 5.991

Table (i): Chi-square result for hypothesis 2

Interpretation 2:
From the result obtained from table (i), we can infer that the calculated value is greater than the tabulated
value ie. 791.07 > 5.991. Thus we can conclude that H 0 is rejected and H1 is accepted. Hence, the brand
names (IPO names), issue size, listing open and listing close value are dependent to each other.

Paytm established its own brand by promoting itself more aggressively through the Indian Premier
League and other means. As a result, when the share was expected to expand in other Cloud storage,
Paybots, and so on, the valuation was overvalued, but the market suffered as a result. This was due to the
ambiguity in the business model. This was the primary reason why Paytm's issue size, opening and closing
value were greater than PB Fintech's. The preceding results demonstrate that the brand name always has an
effect on the market price of a share. As a result, before investing in a company, it is critical to examine its
valuation ratio.

Analysis 3: Fundamental analysis

1. Comparative analysis of PB Fintech Limited
The other liabilities are a part of current liabilities. So, we can see that the current liabilities have
decreased of 17% in 2020 to 13% in 2021. The capital work in progress and other assets together form
current assets. Since capital work in progress is zero so the change in other assets make up current assets.
We can see that there has been a significant drop in current assets from 181%in 2020 to 44% in 2021.
Though both current liabilities and assets have decreased but still current assets are more than current
liabilities so it can be said that PB Fintech Limited can pay its short-term obligations. There has been a
decrease in the fixed assets from Rs. 147 crores in 2020 to Rs. 125 crores in 2021. The decrease is
significant. Also, the borrowing of the firm has increased with a bare minimal of Rs. 1 crore and the share
capital stand no change. This indicates that the company is selling some part of the fixed assets to invest in
long term investment as the investments of the firm has increased from Rs. 2 crores in 2020 to Rs. 138
crores in 2021. The reserves have increased from Rs. 1265 crores in 2020 to Rs. 1990 crores in 2021. This
means that the company is trying to preserve some part of its earnings for future uncertainties. This shows
the futuristic focus of the company. The financial position of the company as a whole is satisfactory.

Comparative analysis of One97 Communication (Paytm)

Other liabilities are the part of current liabilities has increased from Rs.1690 crores to Rs.1907 crores
which means company’s short-term borrowings is increasing. Reserves have been Rs. 8351 crores in 2020
and Rs.6924 crores means it has decreased for 39% to -17% that means company is facing a shortage of
reserves. There is no change in company’s share capital. Fixed Assets has decreased from Rs.508 crores
2020 to Rs.390 crores 2021. Whereas, borrowings have increased from Rs.405 crores in 2020 to Rs.588
crores in 2021. It clearly shows taking loans against their fixed assets. Other assets have improved from
Rs.5776 crores in 2020 to Rs.7767 crores in 2021 which company is an position to pay off their short term
debts. Reserves are 73% of total liabilities in 2021 which decreasing from last year. From the P&L, we can
infer that maximum effect is from operating expenses. Even interests and depreciation have a significant
impact of the profit and loss statement. Thus the final figure of profit and loss has been majorly effected by
the operating expenses, interest payment and depreciation There has been a significant jump in in current
assets in other assets that is from 54% in 2020 to 81% in 2021. There has been a drastic fall in investments
that from 40% in 2020 of the total assets to 13% of the total assets. Overall company’s financial position is
not good and needs a lot of improvements.

Ratios analysis of One97 Communications and PB Fintech

To further identify the capital structure of both the organizations, fundamental analysis was
performed. This includes trend, common-size and ratio analysis.
Result 3:

Ratio Analysis of One97 Communications Ratio analysis of PB Fintech Company

Particulars Mar-19 Mar-20 Mar-21 Mar-19 Mar-20 Mar-21
Profitablity Ratios
Return on Equity -65.606 -33.682 -22.337 -1.650 0.470 0.640
Return on Assets -0.456 -0.270 -0.165 -1.630 0.470 0.630
Gross Profit -134.885 -79.133 -62.880 -68.293 -41.505 -18.038
Net Profit -129.836 -90.947 -58.493 -70.528 -39.429 -16.911

Solvency Ratios
Debt to Equty 12.448 6.750 9.800 89.000 108.000 109.000
Interest Coverage -198.000 -56.660 -43.333 -42.125 -24.583 -11.833

Liquidity Ratios
Current Ratios 2.549 3.418 4.073 2.931 7.030 8.952

Table (ii): Comparative ratio analysis between Paytm and PB Fintech

Interpretation 3:

Return on equity: Though One 97 communications are improving year on year but it will another year or
two to get a positive return on equity. In comparison to One97 communications PB Fintech has achieved a
positive return on equity in 2020. We can infer from this that PB Fintech is better in terms on return on
equity.
Return on assets: Though One 97 communications are improving year on year but it will another year or
two to get a positive return on assets. In comparison to One97 communications PB Fintech has achieved a
positive return on assets in 2020. We can infer from this that PB Fintech is better in terms on return on
assets.
Gross Profit Ratio: Though One 97 communications are improving year on year but it will another year or
two to get a positive gross profit ratio. PB Fintech has negative figures but it is very less than One97
communications. PB Fintech will achieve a positive in another year or two.
Net Profit: As same as gross profit.
Interest coverage ratio: Same as gross profit ratio.
Debt to equity ratio: We can see that both the companies are showing extreme conditions in this ratio. So,
PB Fintech’s debt is increasing year on year with a huge margin in a span of three years. Whereas One97 is
decreasing.
Current Ratio: Both are having good current ratio which they easily pay their short-term debts.
So, Overall we can say that PB Fintech is better than One97 Communications.

Analysis 4:

Stakeholder’s perspective on PB Fintech (Policybazaar and Paisabazaar)

The PB Fintech is the child company of policy bazaar, and the share price has reduced low. It has
been reduced because the one-month lock-in period with the anchor investors has expired as of 31 st
December 2021. On the issued date, the share was priced at rupees 980 per share on 15th November. With
this, they have raised 5000 crores. They have allocated rupees 2000 crores for anchor investors while they
hold 33.5% of the shares. Now the share has been reduced to 1085. Policy Bazaar’s market share is 93.4%
as of the financial year 2020 with the use of online insurance distribution platforms.
They are expanding their customer base with the help of developers. According to (Reporter, 2021),
the share price has been reduced to attract investors, and it has a customer-centric approach. The profit of the
paisa bazaar is found to be higher than the policy bazaar. The use of technology is attracting so is their
company as they are attracting investors through disruptive technology, and the shares are better than Paytm.
Stakeholder’s perspective on Paytm
As of 20th January, the IPO hit a low of rupees 990 per share. It was issued at rupees 2150 per share
in November 2020. The foreign portfolio investors hold a 10.37%, and the individual investors hold a share
of 12.05% As per the report from (Reporter, 2022), the target price for Paytm was 1200 rupees. According
to HDFC Securities’ IPO note Paytm’s net losses could be unprofitable. The organization may not be
financially beneficial if payment processing fees charged to financial institutions and payment networks rise
significantly.
According to Vijay Shekar Sharma, CEO of Paytm (Now |, n.d.), the stock has performed better than
its peers. The people underestimate the size of revenue from payments. South American companies are 70%
down, and it is far better running and Paytm has the ability to increase its share and revenue. UPI to buyer
and consumer to buyer with the use of Paytm they would be only to benefit instead of giving commissions
and facing charges with a third part bank services. Paytm is building its next product out of revenue. Credit
is the most money kind of financial service. With Bajaj being around for 30-32 years, the CEO claimed
Paytm had processed more loans in less than three years.

Analysis 5:

Comparison based on Business Model of PB Fintech and Paytm

PB Fintech

Policy Bazaar’s business model is considered a great

success because it has been successful, and operations
have increased by more than 35% in FY 2022. It serves
as a resource for its customers by informing them about
the various products, their prices, and their benefits.
Additionally, it is a cost-effective method of
determining the value of each product and thus remains
extremely beneficial. Thus, progress is well understood.

Figure (ii): Business model of Policybazaar

One97 Communication
Paytm's business model is considered good, but it is not
very profitable because it is not well understood. As a
result, profitability has plummeted. The company's
share price has also dropped more than 45%. 
According to experts (Top 5 Reasons Why Paytm’s
Stock Price Is Falling, n.d.), the poor performance is
the result of an excessive valuation and a lack of clear
guidance from management on when the company will
begin to profit. And it is well understood that a
payment gateway cannot be profitable in this manner.
Figure (iii): Business model of Paytm

Findings

Figure (iv): Financial Lifecycle graph compared with both the companies
  The Financial Lifecycle graph (figure (iv)) is considered in common to understand the growth of
Paytm and PB Fintech. 
 During the launch stage, PB Fintech had shown a small growth but drastically reduced when it
entered into the Growing stage. Whereas, Paytm, since the launch of its IPO, the share price has not
even touched the issue price. This shows that the company is declining in the Growing stage.
 At initial, any startup company will definitely decline, but after a few months, the graph tends to shift
in the upward direction. Here, in this case, the performance of PB Fintech is much better when
compared to the performance of Paytm. 
 Even though the company slightly fell below the profit line, it started picking up its growth, as
mentioned in the stakeholder’s section. 
 According to the graph above, while Paytm’s business model is sound, it is not well understood by
the general public and stakeholder community regarding the IPO, whereas PB Fintech is gradually
growing and profitable. While Paytm’s new Initial Public Offering promises a slew of new tasks and
options enabled by disruptive technology, the company’s business model is unpopular with the
public and continues to lose money. It appears as though there are too many hands in a single bowl.
 Based on the dilution effect, the owners of Paytm and PB Fintech have reduced their ownership
percentage to launch the IPO. Reducing the ownership will reduce the profitability percentage for the
owners.

Suggestions
 Based on the foregoing analysis and findings, both companies are valued at a premium. This indicates
that the risk factor for both organisations is quite high. Thus, it is critical for both companies to minimise
costs in order to generate high returns for investors. To compensate for the losses, both organisations’
growth rates should be extremely high, and the discount factor should be kept to a minimum.
 Paytm prioritised expansion prior to its Initial Public Offering. The company desired to expand into
additional verticals, such as digital payments, insurance, and e-commerce. The reality is that
diversification of portfolios is always riskier before market results are known. As a result of this finding,
we can deduce that it is always preferable for investors to focus on the stock’s value rather than its price.
 PB Fintech has a better chance of recouping its losses by implementing a shared value model that
strengthens the communities in which it operates. If an insurance company offers beneficial programmes
that encourage investors to maintain good health, there is a chance that the number of claims will
decrease, thereby increasing the company’s profit and value.
 A good collaboration with a stable company will be another option for overcoming the crisis. Paytm,
instead of relying on Alibaba.com as stated (“India’s Biggest IPO Yet,” 2021), could consider a well-
known company such as Google to support their cloud infrastructure. This will increase investors’
confidence in continuing to hold their shares, believing that the performance will improve over time.
 This could have reduced market volatility. The capital structure of both companies should be fine-tuned
for wealth maximisation.

Conclusion

The analysis done above clearly shows that the performance is unquestionably based on the business
model as well as the brand name managed by the organization. If a company has a good reputation but fails
to focus on its business model, it will fail to improve its profit. Based on the findings, we can conclude that,
while PB Fintech has a lower reputation than Paytm, it has more opportunities to grow than Paytm. Paytm’s
growth can still be improved because it has a larger number of subscribers who continue to use the Paytm
platform as an online payment platform. As a result, if its strategies are changed, there is a chance that its
performance will improve in the long run.
References
[1] India’s biggest IPO yet: Why the biggest gainer is not Paytm founder but investor Alibaba. (2021,
October 29). The Times of India. https://timesofindia.indiatimes.com/business/india-business/indias-
biggest-ipo-yet-why-the-biggest-gainer-is-not-paytm-founder-but-investor-alibaba/articleshow/
87357840.cms

[1] IPO Historic Table—IPO listing, IPO market, IPO issue, Subscription. (n.d.). Retrieved November 28,
2021, from https://www.moneycontrol.com/ipo/IPO Historic Table - IPO listing, IPO market, IPO issue,
Subscription

[2] Matharu, J. S. (2021). Initial Performance of Indian IPOs before the Financial Crisis. BIMTECH
Business Perspective (BSP), 1–10.

[3] Merchant, Z. (2021, November 15). Why IPO-bound fintech startups should have one eye on their US
counterparts. The Economic Times. https://economictimes.indiatimes.com/tech/startups/why-ipo-bound-
fintech-startups-should-have-one-eye-on-their-us-counterparts/articleshow/87719465.cms?from=mdr
[4] November 19, I. T. W. D. N. D., November 19, 2021UPDATED:, & Ist, 2021 16:35. (n.d.). Explained:
How Paytm’s weak stock market debut impacted investors. India Today. Retrieved November 28, 2021,
from https://www.indiatoday.in/business/story/explained-how-paytm-s-weak-stock-market-debut-
impacted-investors-1878665-2021-11-19

[5] November 29, I. T. W. D. N. D., November 29, 2021UPDATED:, & Ist, 2021 11:07. (n.d.). Explained:
Why Paytm shares fell sharply in early trade. India Today. Retrieved November 30, 2021, from
https://www.indiatoday.in/business/story/why-paytm-shares-fell-after-q2fy22-results-check-stock-price-
1881994-2021-11-29

[6] Now |, E. T. (n.d.). Paytm CEO Vijay Shekhar Sharma defends stock performance, says performing
better than global peers. The Economic Times. Retrieved January 24, 2022, from
https://economictimes.indiatimes.com/tech/startups/paytm-ceo-vijay-shekhar-sharma-defends-stock-
performance-says-performing-better-than-global-peers/videoshow/88859748.cms

[7] Paytm IPO Date, Price, GMP, Review, Analysis & Details. (n.d.). Retrieved November 28, 2021, from
https://www.chittorgarh.com/ipo/paytm-ipo/1128/

[8] PB Fintech IPO review (May apply). (n.d.). Retrieved November 28, 2021, from
https://www.chittorgarh.com/ipo_review/policybazaar-ipo/3168/

[9] PB Fintech Limited. (n.d.). Retrieved November 28, 2021, from https://www.pbfintech.in/
[10] Reporter, S. I. (2021, December 13). Policybazaar slips 4% to a new low, stock down 26% from all-
time high. Business Standard India. https://www.business-standard.com/article/markets/policybazzar-
slips-4-to-a-new-low-stock-down-26-from-all-time-high-121121300318_1.html

[11] Reporter, S. I. (2022, January 19). Paytm slips 5% to hit new low; falls 26% in past three weeks.
Business Standard India. https://www.business-standard.com/article/markets/paytm-slips-5-to-hit-new-
low-of-rs-990-down-26-in-3-weeks-122011900657_1.html

[12] Shiprapruthy, & Kumar, P. (2013). IPO PERFORMANCE IN INDIA.

[13] Staff, N. (2021, November 15). PB Fintech ends in the green. NEWS9LIVE.
https://www.news9live.com/business/companies/pb-fintech-had-a-fairly-good-listing-ended-the-day-up-
23-indicating-good-investor-appetite-133811

[14] Top 5 Reasons Why Paytm’s Stock Price Is Falling. (n.d.). Moneycontrol. Retrieved January 27,
2022, from https://www.moneycontrol.com/news/business/ipo/top-5-reasons-why-paytms-stock-price-is-
falling-7932311.html