India’s Paytm crashes in market debut, business model questioned

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MUMBAI, Nov 18 (Businesshala) – Indian digital payments firm Paytm (PAYT.NS) slid 26% on its first day of trading, with investors questioning its lack of profits and its high valuations in the country’s biggest IPO. raised.

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While there were some expectations that Paytm’s market debut could be overwhelming, the sharp drop on Thursday was surprising.

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The shares were exchanged at an offer price of Rs 2,150 against Rs 1,586.35, valuing the company at around $13.9 billion.

It was not far beyond Rs 1,560 – this level represents a drop of 20% from its open which would trigger the exchange’s circuit breaker and halt trading for the day.

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Backed by China’s Ant Group and Japan’s SoftBank (9984.T), the fintech company grew rapidly and expanded into a plethora of services after Uber (UBER.N) listed it as an instant payment option in India. Insurance and sale of gold, movie and flight tickets, bank deposits and remittances.

Paytm expects it to break even by the end of next year or even early 2023, a source familiar with the matter told Businesshala in July, though the company said in its prospectus that it expects losses for the foreseeable future. have hope.

There was a lack of confidence among investors and analysts on Thursday.

“Paytm’s financials are not very impressive and growth prospects seem limited… Obviously the company doesn’t have a clear path to profit,” said Shifra Samsudin, Lightstream Research Analyst, published on SmartKarma.

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

Although Paytm’s $2.5 billion offer price was at the top of the indicative range, demand was very weak compared to the recent stock sale, as Paytm has lost some market share to Google and Flipkart’s PhonePe.

It raised $1.1 billion from institutional investors and last week received bids for the remaining shares worth $2.64 billion, or a relatively low oversubscription level of 1.89 times.

Many market participants saw the stock’s catastrophic debut as a sign that investors had become disillusioned with a string of IPOs recently combined with soaring valuations.

Sumeet Singh, Research Director, Equitas, which publishes SmartKarma, said, “It seems that most of the domestic institutional investors have given up on the IPO.

He said the stock was offered at 27 times enterprise value/gross profit for FY2024, more than 21.3 times for Zomato Ltd (ZOMT.NS) and 23 times costlier for C Ltd (SE.N) Was.

He also noted that both Ant and SoftBank had cut their shares in the offering. Ant cut its stake from 28% to 23%, and SoftBank’s Vision Fund slashed its stake by 2.5 percentage points to 16%.

Mumbai-based investment advisor Sandeep Sabharwal said Paytm’s listing could bring “an end to unpleasant pricing in IPO markets”.

The success of Paytm has made founder Vijay Shekhar Sharma, the son of a school teacher, a billionaire with a net worth of $2.4 billion, according to Forbes. Its IPO has created hundreds of new millionaires in a country where per capita income is less than $2,000.

($1 = 74.355 Indian Rupee)

Reporting by Nupur Anand in Mumbai, Sankalp Fartiyal in New Delhi and Vishwadha Chander in Bengaluru; Additional reporting by Scott Murdoch, Chandini Monappa, Abhiroop Roy and Savio Shetty; Editing by Edwina Gibbs

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