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Monday, December 06, 2021

Paytm crashes on listing day, 1/4th investor wealth eroded

Paytm got listed at Rs 1,955, a discount of 9 per cent, on the BSE and plunged to close at Rs 1564.15, down by 27.24 per cent from the IPO price.

By: ENS Economic Bureau | Mumbai |
Updated: November 19, 2021 6:09:05 am
It hit the 20 per cent lower circuit from the opening price and trading was stopped. Market participant said an inflated valuation and a large float mainly contributed to the weak listing.

INDIA’S LARGEST IPO (initial public offering) floated by One97 Communications which owns Paytm disappointed investors on Thursday with the shares closing at a discount of 27.24 per cent to the issue price of Rs 2,150 per share on the first day of listing on the stock exchanges.

Paytm got listed at Rs 1,955, a discount of 9 per cent, on the BSE and plunged to close at Rs 1564.15, down by 27.24 per cent from the IPO price. It hit the 20 per cent lower circuit from the opening price and trading was stopped. Market participant said an inflated valuation and a large float mainly contributed to the weak listing.

The company launched its IPO on November 1 and concluded on November 3 with a price band of Rs 2,080- Rs 2,150 a share. The size of the IPO was Rs 18,300 crore — Rs 8,300 crore through fresh issue of equity shares and Rs 10,000 crore through an offer for sale (OFS).

On the NSE, Paytm listed at Rs 1,950 and crashed to close at Rs 1,560, down 27.44 per cent from the IPO price. At the current price, the firm’s market capitalisation works out to Rs 1,01,399 crore as against expectations of Rs 1,40,000 crore market capitalisation at the issue price. This means investors are poorer by nearly Rs 39,000 crore on the listing day itself.

Explained

Investors not enthused

India’s largest Initial Public Offering sailed through, but investors made losses on the listing day. The reasons for discounted listing include expensive pricing, concerns over growth and Indian retail investors basing the stock on conventional metrics.

Institutional investors have also flagged concerns with the company’s growth prospects considering the absence of a licence to enter the lending business — one of the top profit-making verticals in the fintech space — and the presence of intense competition in the segments Paytm operates. In a Thursday report, Macquarie Research said Paytm’s valuation was “expensive” considering the global benchmark of valuations being 0.3-0.5 times of price-to-sales growth ratio for fintech firms, Paytm valuation was 26 times for 2022-23.

Investors showed less enthusiasm for the Paytm IPO – which oversubscribed 1.89 times, retail portion 1.62 times — when compared to the IPOs of some other tech firms and unicorns. Zomato’s issue was oversubscribed by more than 38 times and Nykaa’s by nearly 82 times. Sigachi Industries IPO was subscribed by over 100 times and Latent View Analytics issue by 338 times. Stock analysts said Paytm’s valuation has traditionally been decided by foreign investors with higher risk appetite. Public markets in India are now deciding it on the basis of conventional profitability and earnings metrics, they said.

At the listing ceremony, an emotional Vijay Shekhar Sharma, founder and CEO of Paytm, said, “People tell me how do I raise money at such high prices, and I just tell them that I never raise money on the price, raise money on purpose.” “Man, I can feel for our cricket team! So many messages, wishes, & kind words. Feels like carrying the hopes and aspirations of young India to the Stock Market. From coal to a fintech, in 11 years – India has transformed. To every Paytmer, you’ve changed India for good,” he said in a tweet.

Paytm’s weak listing also impacted the stock market sentiment with the Sensex falling 372 points to 59,636.01. “Weak listing of India’s largest IPO and soft global market amid rising inflation woes impacted domestic sentiment,” said Vinod Nair, Head of Research at Geojit Financial Services.

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