Paytm’s IPO starts slow as big investors wait

NS ₹The Rs 18,300-crore initial public offering (IPO) of One97 Communications Ltd, which is owned by Paytm, ended on Wednesday.

As per stock exchange data, till 5 pm, the retail investor segment was subscribed the most at 78%, while the portion reserved for institutional investors and high net worth individuals was subscribed at 6% and 2%, respectively.

To be sure, while recent tech IPOs such as Nykaa and Zomato saw a crowd of investors in their opening day itself, they were much smaller than Paytm.

paytm price of its shares ₹2,080-2,150, Company Valuation ₹1.39 trillion at the upper end of the price band. The share sale includes a recent issue of ₹8,300 crore and up to Offer for Sale (OFS) ₹10,000 crores.

OFS includes sale of shares up to ₹402.65 crores by Paytm founder Vijay Shekhar Sharma; till ₹4,704.43 crore by Antfin (Netherlands) Holdings; till ₹784.82 crore by Alibaba.com Singapore e-commerce; till ₹75.02 crore by Elevation CapitalV FII Holdings; till ₹64.01 crore by Elevation Capital V Ltd.; ₹1,327.65 crore by Saif III Mauritius; ₹563.63 crore by Saif Partners; ₹1,689.03 crore by SVF Partners and ₹301.77 crore by International Holdings.

The record-setting IPO has received a mixed response from analysts, who called it a good bet to ride India’s fintech wave, but also pointed out that the shares appear to be priced expensive. “At the upper end of the price band, Paytm is valued at 49.7 times FY2011 revenue. While the valuation may sound costly, Paytm is well positioned to benefit from the exponential growth in mobile payments between FY2011 and FY26 and, therefore, the valuation is reasonable,” said Jyoti Roy, equity strategist at Angel One Ltd.

Paytm had negative cash flow from operating activities for FY19, FY20 and FY21, mainly due to operating losses and additional working capital requirements. Analysts at ICICIDirect said, “Any future negative cash flows could adversely affect the results of operations and financial position.

Ashwath Damodaran, a professor of finance at New York University’s Stern School of Business, wrote on his October 4 blog that almost all of Paytm’s value comes from future expectations, and that there is significant uncertainty on every dimension, it should not come as . Surprisingly, the range of estimated value is very high, with a 3% probability that the firm’s equity is worth nothing more. ₹2 trillion (about $27 billion) at the 90th percentile.

“Even if you are on the side of the company and it is undervalued, it would be hubby to center your portfolio around this stock. In other words, this is the type of stock in which you would invest 5% or maybe 10% of your portfolio, not 25% or 40%,” he said.