Indian Paytm debuts on the stock market
A man works out at a gym near a barcode for Paytm, an Indian mobile phone-based digital payment platform, in New Delhi on November 18, 2021.
Sajjad Hussein | AFP | Getty Images
Shares of Paytm in India fell 24% on their first day of trading as investors questioned the loss-making digital payments company’s business model as it just completed the country’s largest IPO.
The shares changed hands at 1,645 rupees in the morning trade against the offer price of 2,150 rupees, valuing the company backed by the Ant Group at around 1.7 trillion rupees ($ 14.4 billion).
If it fell to Rs 1,560, it would hit the stock market’s 20% breaker, in which case trading would be halted for the day.
“Paytm has been in deficit and there is no sign of profitability in the near future,” said Parth Nyati, founder of Indian trading platform Tradingo.
Paytm, which also counts SoftBank among its backers, raised $ 2.5 billion during its IPO, including $ 1.1 billion from institutional investors. Last week, it received $ 2.64 billion in bids for the remaining shares on offer, or 1.89 times.
Macquarie Research analysts said in a note to clients that Paytm’s business model lacks “focus and direction” and launched a cover with an underperformance rating. “Reaching the scale with profitability is a big challenge,” the memo said, calling the company “grossly greedy”.
Many market participants saw the early stock market crash as a sign that investors had grown disillusioned with a recent round of IPOs with inflated valuations.
Paytm listing could put “an end to odious pricing in IPO markets,” Mumbai-based investment adviser Sandip Sabharwal said, adding that too many companies lack a clear path to profitability .
Engineering graduate Vijay Shekhar Sharma founded Paytm in 2010 as a mobile top-up platform. The company grew rapidly after ride-sharing company Uber listed it as a fast-payment option in India and its usage increased further at the end of 2016, when New Delhi’s shock ban on New Delhi on high value banknotes boosted digital payments.
Paytm’s success made Sharma, the son of a schoolteacher, a billionaire with a net worth of $ 2.4 billion according to Forbes. Its IPO also struck hundreds of new millionaires in a country where per capita income is less than $ 2,000.