New Delhi: Shares of digital payment firm Paytm fell 27.25% from its issue price in its first BSE trade on Thursday, investors began to question its lack of profits and the high valuations it earned in the country’s largest IPO.
The debut of the title itself fell short of expectations. It opened at Rs 1,955, down 9.1% from the issue price of Rs 2,150, and hit the day’s low of Rs 1,586.25 on BSE. It was trading at Rs 1,676.10, down from Rs 473.90 or 22.04 percent, as of 1:00 p.m. IST.
On the NSE, the stock opened at Rs 1,950, marking a drop of 9.3% or Rs 200 from its issue price of Rs 2,150.
Paytm was making headlines as it was the country’s largest IPO, however, the buzz could not be sustained, it seems. Previously, it was expected that Paytm’s market debut could disappoint, Thursday’s sharp drop was surprising.
Paytm’s 18,300 crore IPO, which was the largest in the country, was underwritten 1.89 times last week.
Vijay Shekhar Sharma, founder, and CEO of One97 Communications, the parent company of Paytm, was visibly crying with joy during the opening ceremony.
“One day does not decide our future,” he said. “This is a new business model and it takes a lot for someone to understand it firsthand… there is a lot to bring to markets and market participants,” said Sharma.
According to analysts, Paytm’s expensive valuations are the cause of its share price decline on its first trading day.
Paytm expects it to break even by the end of next year or early 2023, a source familiar with the matter told Reuters in July, although the company said in her prospectus that she expected to incur losses in the foreseeable future. Investors and analysts appeared to lack confidence on Thursday.
According to a Reuters report, “Paytm’s financial data is not very impressive and growth prospects appear limited. Obviously, the company doesn’t have a clear path to profits, ”said Shifara Samsudeen, analyst for LightStream Research who publishes on Smartkarma.
The company announced a loss of Rs 3.82 billion ($ 51.5 million) during the quarter ended in June, larger than a loss of Rs 2.84 billion for the same period last year.
Although Paytm’s $ 2.5 billion offer was valued at the top of the indicative range, demand was much weaker than other recent stock sales as Paytm lost market share to Google and Flipkart’s PhonePe.
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