Indian digital payments firm Paytm posted a 25% drop in its first day of trading on Thursday, with investors questioning its lack of profits and the high valuation it received in the country’s biggest IPO.
Despite fears that Paytm’s market debut could be less than stellar, its sharp decline was surprising, as shares changed hands at Rs 1,614 in afternoon trade, an offer price of Rs 2,150, valuing the firm at around $14.2 billion. Was.
The shares then hit a lower circuit limit of Rs 1,564 on the Bombay Stock Exchange, which restricts purchases by investors only at that price or more.
Founder and CEO Vijay Shekhar Sharma, who cried with joy at the opening ceremony, later told Reuters he was unimpressed by the slide and did not regret listing in India.
“One day doesn’t decide what our future holds,” he said. “It’s a new business model and it takes a lot for someone to understand it directly… there is a lot for us to bring to markets and market participants.”
Paytm, backed by China’s Ant Group and Japan’s SoftBank, grew rapidly after Uber listed it as an instant payment option in India and expanded into a plethora of services – insurance and gold sales, film and flight ticketing. Bank deposits and remittances.
Paytm expects it to break even by the end of next year or even early 2023, a source familiar with the matter told Reuters in July, though the company said in its prospectus that it expects losses in the near future. Is.
There was a lack of confidence among investors and analysts on Thursday.
“Paytm’s financials are not very impressive and growth prospects seem limited… Obviously the company doesn’t have a clear path to profit,” said Shifra Samsudin, Lightstream Research Analyst, published on SmartKarma.
The company reported a loss of Rs 3.82 billion ($51.5 million) for the quarter ended June, up from a loss of Rs 2.84 billion in the same period last year.
But Sharma said the company can be profitable when it doesn’t need to invest “so much” to spur growth opportunities.
“That’s the quarter you’d call break-even,” he said. “But that break-even won’t mean we’re always going to say the same thing.”
Although Paytm’s $2.5 billion offer price was at the top of the indicative range, demand was very weak compared to the recent stock sale, as Paytm has lost some market share to Google and Flipkart’s PhonePe.
It raised $1.1 billion from institutional investors and last week it received $2.64 billion worth of bids for the remaining shares, or a relatively low oversubscription level of 1.89 times.
Many market participants saw the stock’s catastrophic debut as a sign that investors had become disillusioned with a string of IPOs recently combined with soaring valuations.
Sumeet Singh, Research Director, Equitas, which publishes SmartKarma, said, “It seems that most of the domestic institutional investors have given up on the IPO.
He said the stock was offered at 27 times enterprise value/gross profit for FY2024, which was 21.3 times more expensive for Zomato Ltd and 23 times more expensive for C Ltd.
He also noted that both Ant and SoftBank had cut their shares in the offering. Ant slashed its stake from 28% to 23%, and SoftBank’s Vision Fund slashed its stake by 2.5 percentage points to 16%.
Mumbai-based investment advisor Sandeep Sabharwal said Paytm’s listing could bring “an end to unpleasant pricing in IPO markets”.
Compared to Paytm’s weak start, food delivery firm Zomato Ltd grew 66% in early July after raising $1.2 billion.
More recently, shares of FSN E-commerce Ventures, which owns cosmetic-to-fashion platform Nykaa, jumped 80% in its November 10 debut, following its $700 million IPO.
Forbes says the success of Paytm has made Sharma, the son of a school teacher, a billionaire with a net worth of $2.4 billion. Its IPO has created hundreds of new millionaires in a country where per capita income is less than $2,000.
Paytm’s prospectus shows Morgan Stanley, Goldman Sachs, Axis Capital, ICICI Securities, JP Morgan, Citi and HDFC Bank were the book running lead managers.
(Except for the title, this story has not been edited by NDTV staff and is published from a syndicated feed.)