Paytm's fall casts shadow over IPOs for other technology firms in India: Report

On Monday, the digital payments start-up's shares dropped by 17.78% at 1:03 pm to 1,271 compared with the offer price of 2,150 after falling more than 27% on the listing day on November 18.
Some analysts, who predicted Paytm's fall, have said that the stock is still too costly.(Bloomberg Photo)
Some analysts, who predicted Paytm's fall, have said that the stock is still too costly.(Bloomberg Photo)
Updated on Nov 23, 2021 12:20 PM IST
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Written by Harshit Sabarwal | Edited by Amit Chaturvedi, New Delhi

Paytm's shares rose by nearly 7% on Monday after two consecutive sessions of sharp falls as its initial public offering (IPO) failed to make an impact in the stock market debut last week.

On Monday, the digital payments start-up's shares dropped by 17.78% at 1:03 pm to 1,271 compared with the offer price of 2,150 after falling more than 27% on the listing day on November 18. The IPO investors lost as much as $900 million in two days.

The IPO flop has cast a shadow over the prospects of other technology firms in India that are preparing to go public. According to a media report, cited by news agency Bloomberg, payment services firm MobiKwik might delay its IPO by a few months because of a lack of demand from investors along with a 30-40% decline in valuation.

Also Read| Paytm snaps two-day losing streak, shares rise 6%

On the other hand, retail investors, who purchased an unprecedented amount of shares of Paytm's parent firm One97 Communications, have witnessed over 35% of their value being wiped out in just two trading sessions, according to Bloomberg.

Some analysts, who predicted Paytm's fall, have said that the stock is still too costly.

They said that Paytm's $2.5 billion initial public offer has restricted demand, which could bode well for smaller prospective IPOs. Nykaa and Zomato - whose offerings were lesser than that of Paytm's - saw their shares rise by over 80% since their IPOs, Bloomberg further reported.

Suresh Ganapathy and Param Subramanian of Macquarie Capital Securities (India) Pvt, said in a research report that Paytm’s valuation, which is at about 26 times the estimated price-to-sales for the financial year 2023, is expensive especially when profitability remains elusive for a long period of time.

Also Read| Paytm shares tumble for second day after IPO flop, market cap drops

Vijay Shekhar Sharma, the founder of Paytm, compared himself to Tesla's Elon Musk, after Paytm's fall. Sharma urged his employees to look past the initial error and rather focus on long term opportunities for bringing digital payments to India's growing internet population.

(With Bloomberg inputs)

 

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Saturday, December 04, 2021