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Bangalore: India’s largest digital-payments provider lost more than a quarter of its value in its first day of trading, marking one of the worst starts by a major technology company and amid a world-ranked stock-market boom. But it cooled down. The most crazy
The 27.4% drop in Paytm operator One97 Communications Ltd surprised even some skeptics, who questioned the company’s valuation and path to profitability. Retail investors who have piled into the offering are now sitting at huge losses with global wealth managers including BlackRock Inc. and Canada Pension Plan Investment Board.
India’s biggest IPO ever was touted by some as a symbol of the country’s growing appeal as a destination for global capital, especially for technology investors looking for an alternative to China. The question now looming over the $3.5 trillion stock market is whether IPO funding and the optimism that drove the benchmark S&P BSE Sensex to record highs has gone too far.
Yasha Shah, Head of Equity Research at Samco Securities Ltd. said, “Given the excitement around the primary market, clearly, such a fall has come as a surprise.”
In Mumbai, Paytm shares fell up to Rs 1,560.8. This is compared to the IPO price of Rs 2,150, which is the market topper. Sensex fell up to 1% amid biggest fall in Asia.
Morgan Stanley, Goldman Sachs Group Inc., Axis Capital, ICICI Securities, JPMorgan Chase & Company, Citigroup Inc. and HDFC Bank Limited was the Book-Running Lead Manager for Sales.
The payment provider’s IPO has turned out to be one of the most disappointing major tech industries ever. Its Fall Rivals Deliveroo Plc Dip In percentage terms, the sector’s worst day since Telstra Corp.’s first share sale in 1997—up 31%—to rank in the midst of a recession.
Read also: Paytm seeks $20 billion valuation in India’s biggest IPO
retail enthusiasm
Paytm raised about $2.5 billion in the IPO, with individual investors bidding for nearly twice the number of shares available.
Nikhil Kamath, co-founder of the country’s largest brokerage, Zerodha Broking Ltd., was not so surprised by the improvement in Paytm, as the number of shares sold recently for the first time was showing a rise.
Kamat said, “India is excited about IPOs, stocks are backed by a rally and people are fascinated by it.” “For Paytm, the runway for their profitability is too long and it doesn’t justify the far-reaching pricing.”
Kamat said institutional players are more knowledgeable than retail, who are bearing the brunt of the losses. While it cannot be denied that Indian startups have created incredible businesses, they should not be given too much importance, he said.
“There has to be a middle ground where pricing should be more favorable for retail investors,” he said.
Who got Paytm stock in IPO. #paytmlisting pic.twitter.com/RR8BewmamB
— Amit Mishra (@amit6060) November 18, 2021
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long run
Paytm founder and CEO Vijay Shekhar Sharma said in an interview with Bloomberg News minutes after the shares sank in the open that the slowdown is “by no means an indicator of the value of our company.”
“We are in this for the long haul,” he said. “We’ll put our heads down and execute.”
Sharma founded Paytm two decades ago and pioneered digital payments in a predominantly cash transaction country of 1.3 billion people. The acronym for Pay Thru Mobile, rhymes with ATM.
“There is never the right time, the right share price and the right valuation,” Sharma said. “We are at a starting point and investors will get to know us in the coming quarters, years and decades.”
Prior to the listing, Macquarie Capital Securities (India) Limited initiated coverage on the company with an underperform rating and a price target of Rs 1,200, which is more than 40% below the issue price.
“We believe Paytm’s business model lacks focus and direction,” analysts Suresh Ganapathi and Param Subramaniam wrote in the report. “Unless Paytm does not lend, it cannot make significant money by simply being a distributor. So we question its ability to scale with profitability.”
The market debut of Paytm, backed by Berkshire Hathaway Inc., SoftBank Group Corp and Ant Group Company, marks an extraordinary year for India’s internet startup.
The number of so-called unicorns in the country has more than doubled and the public markets have seen strong listing performances from many including food-delivery service Zomato Ltd, beauty retailer Nykaa’s parent FSN E-commerce Ventures Ltd and PB Fintech Ltd, operator of the company. Online insurance marketplace of Policybazaar.
IPOs in the South Asian nation have raised nearly $15 billion so far this year, which is already an annual record for total earnings. Companies that started trading in 2021 grew an average of 23% in their first session, according to data compiled by Bloomberg as of November 15.—bloomberg
Disclosure, Paytm founder Vijay Shekhar Sharma is one of ThePrint’s eminent founder-investors. Please Click here For details on investors.
Read also: Fund manager says Paytm IPO could prove to be a ‘very risky bet’
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