November 26, 2022

India’s Paytm has failed in the market launch and the business model is questionable

Mumbai, Nov 18 (Reuters) – Indian digital payment company Paytm (PAYT.NS) With a 25% drop in the first day of trading on Thursday, investors questioned its non-profit and the high ratings it received at the country’s largest IPO.

Despite fears that Paytm’s market launch could be lower than the star, its steep decline came as a surprise, with the stock turning into Rs 1,614 in the afternoon trade, against the offer price of Rs 2,150, with the company valued at around $ 14.2 billion.

The stock then touched the Lower Circuit limit of Rs 1,564 on the Bombay Stock Exchange, which only restricts investors’ buying at that price or above.

Founder and CEO Vijay Sehgar Sharma, who was in tears at the opening ceremony, later told Reuters that he was not bothered by the slide and did not regret being listed in India.

“One day our future will not be decided. “It’s a new business model and it takes a lot for someone to understand it directly … We have a lot to bring to markets and market participants.”

Paytm is supported by China’s Ant Group and Japan’s SoftBank (9984.D), Grew rapidly after Uber (UBER.N) It is listed as the fastest payment option in India and has expanded into a wide range of services – insurance and gold sales, movie and airline tickets, bank deposits and remittances.

Paytm expects it to crash later next year or even as early as 2023, a source familiar with the matter told Reuters in July, although the company said it would incur losses in the future on its prospects.

Investors and analysts appeared skeptical on Thursday.

“Paytm’s funds are not very interesting and growth prospects seem low … Obviously there is no clear path for the company to make a profit,” said Shifara Samsudeen, a LightStream research analyst at Smartkarma.

The company reported a net loss of 3.82 billion rupees ($ 51.5 million) for the quarter ended June, up from 2.84 billion rupees in the same period last year.

But Sharma said the company can become profitable when it does not need to invest “so much” to fuel growth opportunities.

“That’s the quarter you call Break-Even,” he added. “But that doesn’t mean we’re going to say the same thing forever.”

Although Paytm’s $ 2.5 billion offer was at the top of the index, demand was weaker than other recent sell-offs as Paytm lost some market share to Google and Flipkart’s PhonePe.

It raised $ 1.1 billion from institutional investors and last week bid $ 2.64 billion worth of the remaining shares, or 1.89 times the relatively low volume. read more

Many market participants saw the dreadful introduction of stocks as a sign that investors were disappointed with the recent ratings of IPOs.

“Most domestic institutional investors seem to have skipped the IPO,” said Sumeet Singh, director of research at Aquitas, which publishes SmartCarma.

In the 2024 financial year, the stock was offered at 27 times the company value / gross profit, which is 21.3 times the price of Zomato Ltd. (ZOMT.NS) And 23 times to Sea Limited (Late).

He also noted that both Ant and Softbank have reduced their stake in the offering. Ant reduced its stake from 28% to 23% and SoftBank’s Vision Fund reduced its stake by 2.5% to 16%.

Paytm’s list “will put an end to disgusting pricing in IPO markets,” said Sandeep Sabarwal, an investment adviser based in Mumbai.

Compared to Paytm’s sluggish launch, food distributor Zomato Ltd. rose 66% after raising $ 1.2 billion in early July. read more

Most recently, FSN e-Commerce Ventures shares (FSNE.NS), The fashion platform from cosmetics to Nykaa, jumped 80% in its November 700 launch following its $ 700-million IPO. read more

Paytm’s success has turned a schoolteacher’s son into a millionaire with a net worth of $ 2.4 billion, according to Forbes. Its IPO has generated hundreds of new millionaires in a country where a leader earns less than $ 2,000. read more

Paytm’s prospectus shows that Morgan Stanley, Goldman Sachs, Axis Capital, ICICI Securities, JPMorgan, Citi and HDFC Bank were the leading managers of the book movement.

($ 1 = 74.355 Indian Rupees)

Report by Nupur Anand in Mumbai, Sankalp Partial in New Delhi and Viswada Chander in Bangalore; Additional report by Scott Murdoch, Chandini Monnappa, Abirup Roy and Savio Shetty; Edwina Gibbs Editing

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