The Biggest Indian IPO- Paytm falls 27%

Paytm is an Indian financial technology company that offers a digital payments portal and in-house e-commerce site. Its initial public offering was closed for investment on November 10, 2021. This share opened on November 18, 2021 at the Bombay Stock Exchange (BSE) and National Stock Exchange of India (NSE).

Stock’s Sluggish Performance

The company had expected to raise about $ 2.46 billion from this offering. There were fresh issues worth $1.11 billion and existing shareholders offered to sell shares of $1.35 billion. However, the stocks perfomance was sluggish.

The shares opened at $26.32 on BSE, at a discount of 9% from its issue price of $28.94. It didn’t open with a hike, even though it was the biggest-ever Indian IPO. Also, It closed at $21.06, down by 27.25%, which clearly indicated that the stocks fared badly in the market.

The shares opened at $26.25 on NSE, again at a 9% discounted price than the issue price. Moreover, the stock closed at $21.01, slightly lower than that of BSE. This showed a decline of 27.4%. Overall, paytm stocks dipped in both BSE and NSE by more than 27%.

A sluggish start was not expected by the company as it is India’s biggest fintech company. Also, it eroded $4.71 billion in investors wealth. However, despite the dip in share prices, the company booked the value of over $13.4 billion today. In contrast, the recently listed Zomato’s market capitalization was more than it- $16.4 billion.

Reasons for Sluggish Performance

Analysts pointed that Paytm’s shares were fairly expensive at the debut. Hence, its share prices saw a fall on its very first trading session. Moreover, analysts at Macquarie Research’s note to clients stated that Paytm’s business model was lacking “focus and direction” and and they initiated coverage with an underperform rating. “Achieving scale with profitability a big challenge,” the note stated, and also commented on the country calling it a “cash guzzler”.

The Road Ahead

Analysts at Macquarie Research set a target price for One97 Communication’s shares. The target is set at $16.15 which is much lesser than its issue price of $28.94. This indicates a much worse stock market performance of the company in the near future. 

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