IPO Crash: Paytm Debut on Bourses Crash As It Gets Listed At 9% Discounted Rate
Mumbai, NFAPost: Investors, young entrepreneurs and analysts are shocked at dismal debut of Paytm owned One97 Communications on the bourses as the IPO got listed at 9% discounted rate of the issue price of Rs 2,150.
Besides questioning the business model of the company, the lofty valuation of Paytm put pressure on the rising unicorns as they will have to prove their business model with solid revenue and profit. The companies should have a model in fundraising and going ahead with their wayward nature of cash burn.
Paytm had to halt the trading as the stock fell to 20% lower circuit on day one of its trading and it fell further to end the trading at Rs 1,564, registering 27% steep fall on the BSE.
It is interesting to note that the company’s valuation after the crash on its debut. As per analyst, based on the closing price Paytm is valued nearly at Rs 38,000 crore below Rs 39,000 crore valuation given to Rs 18,300 crore initiatial public offering.
Commenting on the development, Arvian Research stated that Paytm’s market capitalisation works out to Rs 1,01,399 crore as India’s largest had to face a weak IPO and soft global market amid rising inflation woes impacted domestic sentiment.
“Now it is clear that the valuation has come down against market expectations of a Rs-1,40,000 crore valuation. In dollar terms, this works out to nearly $13.65 billion. This valuation is really less than the $16 billion at which it last raised money privately in November 2019,” said Arvian Research.
It is interesting to note that Paytm founder and CEO Vijay Shekhar Sharma’s around 14% stake is now valued at Rs 14,000 crore. Other major shareholder like China’s Alibaba group (6%) and its associate Ant Financial, Japan’s SoftBank and Warren Buffett’s Berkshire Hathaway will also have to face similar fate in their valuation.
According to market analysts, the weak IPO is mainly attributed to an inflated valuation and large float. At the same time, institutional investors have raised concerns with the company’s growth prospects, primarily because of Paytm’s reluctance to take licence to enter the lending business, an area where there is phenomenal growth. The company is also facing heightened competition from other fintech players.
Paytm, whose name rhymes with ATM and is shorthand for Pay Through Mobile, started in 2011 primarily to help users add credit to their prepaid phones before it began to operate a digital wallet service in 2014. Its payments service really took off in 2016, when India’s government invalidated most of the country’s bank notes in an effort to eliminate illegal transactions.
Ahead of the listing on Thursday, Paytm Founder Vijay Shekhar Sharma had said India is the biggest and best fintech opportunity in the world.
“If 2010 was the start of an epochal decade for Chinese entrepreneurs building global tech companies, 2021 will be the start of a similar decade for Indian tech startups,” said Vijay Shekhar Sharma.
Now, Paytm has 337 million users relying on it for financial and e-commerce transactions. It provides digital loans, insurance, wealth management and stockbroking services in a country with an under-developed banking network. Earlier this week, the firm began offering voice trading, leveraging artificial intelligence to allow users to buy and sell shares with voice commands.