The stock of One97 Communications-operated Paytm, which got listed at the Dalal Street a day back, witnessed a horrendous start as prices kept falling through the day. The shares dived as much as 26.2 per cent and hit a low Rs 1,586 against the higher end of the issue price of Rs 2,150 amid weak market conditions. This made India’s largest initial public offering (IPO) lose almost a fourth of its valuation on its debut day at the stock market, a dip that was worse than anticipated. Paytm had floated an IPO worth Rs 18,300 crore earlier in the month after getting a green signal from Sebi.
According to experts, Paytm’s high valuation, muted investor response, and loss-making business acted as catalysts for the downfall, despite the company having a strong market share. The debut price of the stock was lower than anticipated. Paytm stock opened at Rs 1,955, falling 9.1 per cent against the issue price of Rs 2,150 at the upper end at the Bombay Stock Exchange. As per analysts quoted by MoneyControl, only aggressive investors were advised to put in money at the company for investments.
Taking a dig at the poor performance of the company, business tycoon Anand Mahindra compared the listing to a “casino-like feeding frenzy”. “My heart goes out to individual IPO investors who must be rattled but I’m sure Paytm will find its right level. There is, however, a silver lining to this sobering debut: it could moderate the casino-like feeding frenzy for IPO listings & help restore the hunt for true value,” he tweeted on Thursday, November 18.
Paytm’s weak listing took place amid tepid response to the IPO among investors. The Paytm IPO had been subscribed 1.89 as of its final day of bidding, according to data from stock exchange. One97 communications, the parent company of Paytm, received bids for 9.14 crore shares against 4.83 crore shares offered for sale. Qualified institutional buyers subscribed 2.79 times the portion reserved for them, while retail buyers bid 1.66 times the part set aside for them. Non-institutional buyers booked 24 per cent of the shares kept aside for them.
As per experts quoted by MoneyControl, the tepid response was mainly because Paytm has been a loss-making company. “The company has a huge customer base with strong brand positioning and it has an early- mover advantage in digital payment services. However, it is still a loss-making company and very aggressively priced. Therefore, we saw a tepid response in terms of subscriptions,” Santosh Meena, head of research at Swastika Investmart, was quoted as saying.
“The retail portion was subscribed only 1.66 times and non-institutional investors 0.24 times. Also, it is a loss-making company,” said Rahul Sharma, co-founder of Equity99.
Some experts even indicated that Paytm will not become a profit making company in the near future. According to Parth Nyati, founder of Tradingo, only aggressive investors must hold the stock to the company. “New investors are advised to look for peers that may perform much better than Paytm. We feel the company sought the high valuation on the strength of its brand and it might see a correction in the near term,” he was quoted as saying.
One97 Communications reported a total loss of Rs 1,701 crore for the year ended March 2021, against the loss of Rs 2,942.4 crore in FY20, as well as a loss of Rs 4,230.9 crore in FY19. Consolidated income during the year FY21 declined to Rs 3,186.8 crore, from Rs 3,540.7 crore in FY20 and Rs 3,579.7 crore in FY19.
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