Paytm’s disappointing stock market opening hurts future offerings

Accountant EY said Indian companies raised $9.7 billion through initial share sales in the first nine months of 2021, the highest in the same period of the past two decades.

But offerings planned later this year, such as that of payments rival MobiKwik and hotel aggregator Oyo, will face questions after Paytm fell over 27% for the first time, as investors worried over its loss in profits and higher pricing. Had gone.

“This episode is expected to add some of the realism to valuations that promoters expect from public markets,” said Christy Fong, a senior investment director at Aberden, a Singapore-based fund manager.

Investors and analysts, who expressed concern over loss-making Paytm’s IPO valuation of around $18.7 billion, cautioned that a “bleak” valuation with unclear business model may not bode well in the current market.

“It will take three to four months for people to forget Paytm and destroy money,” said Jimit Modi, founder of Mumbai-based brokerage Samco Securities.

“By that time, it’s going to be tough to have all the super-expensive IPOs.”

But the launch of Paytm, which is backed by Ant Group and SoftBank, was in stark contrast to food delivery firm Zomato, which grew 66% in July after raising $1.2 billion.

Similarly, shares of FSN E-commerce, which owns cosmetic-to-fashion platform Nykaa, jumped 80% in its opening this month.

Now analysts fear that even the arrival of high demand IPOs could impact the listing.

“This will lead to spokes in the market… Even those who have seen large subscriptions will see a drop in their premiums,” Arun Kejriwal, founder of independent research firm KRIS, told Reuters.

Behemoth Lic in the Wings

All eyes are turning to plans for India’s biggest IPO ever, state-owned life insurer LIC, which is expected to take place by the end of March 2022 and if the government offers a 10% stake it would be could raise more than $10 billion.

Some analysts see little risk from Paytm’s collapse for LIC, however, as it is a household name in India, commanding over 60% of the life insurance market, with assets of over $500 billion.

An executive said, ‘I believe that even if they price LIC a little more, I don’t think what it is, and what it means, and what has been built over many years. that it would be a problem. In a boutique investment bank that demanded anonymity.

“There’s tremendous interest and money in the market.”

Some say the concerns over LIC cannot be ruled out, however, despite a business model that is completely different from that of Paytm.

“After this (Paytm) listing, everyone will be in a learning position,” said an investment banker working on LIC’s IPO. He said he is confident about its opportunities.

The government has nominated Goldman Sachs, Citigroup, SBI Capital Markets, JM Financial, Axis Capital, Nomura, BofA Securities, JP Morgan India, ICICI Securities and Kotak Mahindra to handle the IPO.

This story has been published without modification in text from a wire agency feed. Only the title has been changed.