India’s biggest-ever IPO Paytm slumps on market debut

Indian cell funds large Paytm misplaced 1 / 4 of its worth on its market debut Thursday, after elevating $2.5 billion within the nation’s biggest-ever IPO, as merchants questioned whether or not the loss-making agency would ever flip a revenue.

Asia’s third-largest economic system has been in a grip of an preliminary public providing frenzy, with start-ups attracting billions of {dollars} in funding in a vivid spot within the Covid-battered economic system.

But whereas Paytm has established a number one place within the fast-growing market for cell funds it has misplaced cash in every of the previous three years and its market debut confirmed the bounds of investor urge for food.

Founder Vijay Shekhar Sharma, as soon as named as India’s youngest billionaire, wiped away tears from his eyes when the nationwide anthem was performed on the opening ceremony earlier than buying and selling started on the Bombay Stock Exchange.

Referring to the phrase “Bharat bhagya vidhata”—”the one who will define the fortune of this country”—he stated Paytm has “actually done that”.

But the corporate’s shares tanked greater than 25 p.c from their IPO value of two,150 rupees inside minutes of the open, earlier than recovering barely.

“There is a lot of euphoria for the digital space and that seems to now be subsiding,” stated SMC Global Securities analyst Saurabh Jain.

“These companies are coming out with IPOs at scorching valuations and it’s anybody’s guess what valuations are correct,” he instructed AFP.

“It is very difficult for a company like Paytm to turn profitable. They have the scalability but they are not able to make money through their business model.”

Following the debut, Paytm’s market capitalisation fell from an IPO valuation of $20 billion to below $14 billion when shares dropped as little as 1,586 rupees.

Rakesh Mehta, a 49-year-old Kolkata-based rice exporter, stated he had purchased 12 shares value 25,800 rupees in Paytm, inspired by Sharma’s bullishness about his agency.

“I was shocked to see the price when it opened. I didn’t get much of a chance to sell,” Mehta instructed AFP.

“I was planning to sell 50 percent for listing gains and hold the rest. Now I have no choice but to hold on. If it goes anywhere close to my purchase price, I will definitely sell. I wouldn’t want to risk holding it further.”

Rock music

Sharma—a schoolteacher’s son who says he discovered English by listening to rock music—retains a 14 p.c stake within the enterprise, value $2.4 billion on the IPO value however roughly $420 million much less by lunchtime.

Other shareholders embody Chinese tycoon Jack Ma’s Alibaba group and affiliate Ant Financial, together with Japan’s SoftBank and Warren Buffett’s Berkshire Hathaway.

Ant Financial bought 3.5 p.c of its 28 p.c stake within the IPO to satisfy regulatory necessities that no shareholder ought to personal greater than 25 p.c of a listed firm. Alibaba continues to personal one other six p.c.

Paytm’s platform was launched in 2010 and rapidly grew to become synonymous with digital funds in a rustic historically dominated by money transactions.

It has benefited from the federal government’s efforts to curb the usage of money—together with the demonetisation of almost all banknotes in circulation 5 years in the past—and most not too long ago, from the pandemic.

Nearly 22 million Indian store house owners, taxi and rickshaw drivers and different distributors settle for funds as little as 10 rupees ($0.13) utilizing Paytm’s ubiquitous blue-and-white QR code stickers.

The platform had 337 million clients on the finish of June, in response to the corporate’s regulatory submitting. In 2020-21 it dealt with transactions value greater than $54 billion.

Apart from Paytm, Indian firms have raised a file $10.5 billion by means of IPOs in 2021 thus far, together with magnificence retailer Nykaa, which doubled on its debut final week.

© 2021 AFP