The fall in Paytm shares after India’s biggest initial public offering is proving to be a costly lesson for early backers of the firm.
Paytm shares have lost 58% since the stock listed on November 18. It has reduced the valuation of its parent One97 Communications Ltd from $20 billion to $7.8 billion.
According to people familiar with the matter, SoftBank Group Corp’s 2017 investment valued the Indian company at around $7 billion. People said Berkshire Hathaway Inc. invested in One97 when the company was valued at more than $10 billion in 2018, and T. Rowe Price Group Inc. invested the following year at a valuation of $16 billion.
Paytm is struggling To convince investors and analysts alike about the potential of the digital payments giant’s business model. The loss widened to Rs 4.74 billion ($63 million) in the July-to-September quarter from a year ago amid rising expenses. The fall in its shares amid global equity sell-off has also cast a shadow over the prospects of technology firms preparing to go public in the Indian market. More than 40% of the companies that sold shares for the first time in India last year are under water.
A Paytm representative said by email that the effective cost of SoftBank’s 17.47% stake in the company is Rs 800 per share and for Ant Group it is Rs 330 per share, refusing to comment further on valuation. The stock had closed at Rs 903.05 on Friday. Jack Ma’s Ant is the largest shareholder with a 25% stake.
SoftBank and T. Rowe Price declined to comment, while representatives for Berkshire Hathaway and Ant did not respond to requests for comment.
Paytm had raised $2.5 billion in its IPO, which was the top market price. Its debut was one of the worst by a major technology firm since the dot-com bubble era of the late 1990s. Pre-IPO investors have a one-year lock-in that expires in November, according to its offer document. Paytm provides digital loan, insurance, wealth management and stockbroking services.
This story has been published without modification in text from a wire agency feed. Only the title has been changed.
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