Shares in India’s Paytm plunge 24% in market debut, business model questioned

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MUMBAI (Businesshala) – Shares in India’s Paytm plunged 24% on its first day of trading, with investors questioning the business model of the loss-making digital payments firm even as it completed the country’s biggest IPO. did.

FILE PHOTO: The interface of Indian payments app Paytm is seen in front of the logo displayed in this image taken on July 7, 2021. Businesshala/Florence Low/Illustrations/File photo

Shares were changing hands at Rs 1,645 in morning trade, with an offer price of Rs 2,150, valuing the Ant Group-backed company at around Rs 1.07 trillion ($14.4 billion).

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If it falls to Rs 1,560, it will hit the 20% circuit breaker of the exchange, at which trading will be halted for the day.

Partha Nyati, Founder, Indian trading platform Tradingo said, “Paytm is making losses and there is no sign of turning profit in the near future.”

Paytm, which also counts SoftBank among its backers, raised $2.5 billion in its initial public offering, of which $1.1 billion was from institutional investors. Last week it received $2.64 billion worth of bids for the remaining shares, or 1.89 times.

Analysts at Macquarie Research said in a note to clients that Paytm’s business model lacked “focus and direction” and began coverage with an underperform rating. “Achieving scale with profitability is a major challenge,” the note said.

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

Mumbai-based investment advisor Sandeep Sabharwal said the listing of Paytm could put an end to unpleasant prices in the IPO markets.

Engineering graduate Vijay Shekhar Sharma founded Paytm in 2010 as a platform for mobile recharge. The company grew rapidly after ride-hailing firm Uber listed it as an instant payment option in India, and its use increased in late 2016 when New Delhi’s shock ban on high-denomination currency notes allowed digital payments to take off. promoted.

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

($1 = 74.3550 Indian Rupee)

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

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