'Paytm IPO Was All Hype:' Business Coach Who Went Viral Sees 'Massive Correction' For Startups

India's startup ecosystem is in for a "major correction" and Paytm's IPO was "massive hype," according to a business coach and entrepreneur who went viral recently for his candid comments on the digital payments firm.

What Happened: In an exclusive conversation with Benzinga Pro, Indian business coach Rajiv Talreja said there was "massive hype created about the IPO of Paytm."

He added that "[Paytm's] listing was done at a price that did not justify its business value, and accordingly, the market has seen a drastic correction."

Paytm's parent, One 97 Communications Ltd has lost more than 61% of its value since its domestic market debut in November last year. 

Chinese magnate Jack Ma-owned Alibaba Group Holdings BABA recently sold its stake in Paytm Mall, the e-commerce arm of the payments firm.

Talreja believes this case extends to many recent Indian IPOs.

"If we just look at the IPOs in the last couple of years, we have a handful of such cases."

He said such incidents leave retail investors "vulnerable," as they view the companies through their marketing strategies rather than fundamentals.

"When you have such complex PR and marketing engines which build [a] brand ... for close to a decade and then [the company] comes to an IPO, not every retail investor does their due diligence," he said. 

"But then, the common man loses their wealth, while the management says 'our business model is a work in progress' ... that makes people question the way the system is designed."

India has seen a frenzy of IPOs recently, with nearly 17 companies having gone public so far in 2022 despite the subdued market sentiment. That, however, is lower than last year's 65 domestic IPOs.

Talreja said the Indian startup ecosystem had become more about the "game of chasing valuations," whereas it should be more about the company's profitability and fundamentals.

"Correction ahead"

According to Talreja, the Indian startup ecosystem will see a "significant correction" in the near future. 

"With the infusion of funds drying up, we are already seeing organizations laying off [staff], and while that may not be a healthy indicator, it is a sign of consciousness around the cash sitting in their bank accounts."

According to media reports, Indian startups including Ola, Unacademy, and Vedantu have laid off more than 6,000 people so far, and that number is expected to surge in the coming months.