Paytm shares plunge more than 23% below IPO price in disastrous debut : Tech News

Mumbai: Shares of One97 Communications Ltd., the parent entity of fintech major , listed at a steep discount to its IPO price of Rs 2,150, bucking the trend of stellar public market debuts by new-age internet companies in India.

At 10-45 am, the Paytm stock was trading 23.07% below its issue price at Rs 1,653.90, ascribing the fintech firm a market capitalisation of Rs 1,07,211.50 crore. In comparison, shares of Zomato and Nykaa parent FSN E-Commerce Ventures surged in the first few hours of trading to achieve a market cap of Rs 1 lakh crore, while PB Fintech had a valuation of over Rs 50,000 crore at the end of day one.

“I hope the Paytm story can inspire entrepreneurs, even for the ones who do not have the background, but I hope this inspires them that they can do it,” Sharma said during the listing event at the BSE in Mumbai on Thursday. “I believe India is meant for stories like this and many more stories like this to come up.”

Paytm Group’s CFO Madhur Deora said his company has done what “many said it can’t be done”. “We have the bluest of blue-chip investors from the world and one million retail investors with us,” he said.

Investment bank Macquarie
has initiated coverage of the Paytm stock at “underperform” and set a price target of Rs 1,200, 40% lower than the IPO price.

“Too many fingers in too many pies,” Macquarie says about Paytm in a report ahead of the company’s listing. “We believe Paytm’s business model lacks focus and direction. We initiate with an UP rating and TP of Rs1,200, implying 40%+ downside.”

“Competition and regulation will drive down unit economics and/or growth prospects in the medium term in our view,” the Macquarie report stated. “Unless Paytm lends, it can’t make significant money by merely being a distributor. We therefore question its ability to achieve scale with profitability.”

The buzz in the gray market, by no means an official metric, had indicated a muted listing.

On Wednesday, Paytm shares
changed hands in the grey market at a premium of just Rs 20-25 over the
final issue price of Rs 2,150. On Tuesday, they were trading at a premium of just Rs 30, a mere 1.4% increase over the final issue price, according to IPO Watch.

The stock was trading at Rs 2,300 a share on the grey market on November 7, a premium of Rs 150 or 7% over the issue price. This fell to Rs 80 on the first day of the IPO and by the close of the issue on November 10 it was at Rs 40.

Dealers tracking the grey market said the ultra-expensive pricing, poor financials and muted growth prospects were the key reasons for the poor listing.

Abhay Doshi, cofounder at UnlistedArena, said that Paytm was likely to be a flop on debut, despite the hype it generated as India’s biggest IPO ever. “The valuations of the issue were on the expensive side. Also, the company has not shown any significant performance in the financials and it is losing market share,” he said.

The Nov. 8-10 Paytm IPO—
billed as India’s biggest—comprised Rs 8,300 crore worth of new stock, while existing shareholders and promoters sold shares worth Rs 10,000 crore.

The issue was
subscribed just 18% on the first day of bidding, with the company receiving bids for 88.21 lakh of the 4.83 crore equity shares on offer. On day 2, it
was subscribed 48%, with 2.34 crore bids received. India’s biggest IPO was eventually
fully subscribed on day three after qualified institutional buyers stepped in.

ETtech’s Apoorva Mittal and Digbijay Mishra contributed to this story.