New Delhi: Stocks of digital payments company Paytm tumbled 27.25 per cent compared to its issue price on its maiden day trade on the BSE on Thursday, with investors started questioning its lack of profits and the lofty valuations it gained in the country’s largest-ever IPO.
The stock’s debut itself was lower than expected. It opened at Rs 1,955, down 9.1 per cent from the issue price of Rs 2,150, and hit the day’s low of Rs 1,586.25 on the BSE. It was trading at Rs 1,676.10, down by Rs 473.90 or 22.04 percent, at 13:00 hours IST.
On the NSE, the stock opened for trading at Rs 1,950, marking a decline of 9.3 per cent or Rs 200 from its issue price of Rs 2,150.
Paytm was hitting the headlines for it being the biggest IPO in the country, however, the buzz could not be sustained it seems. Earlier there were some expectations that Paytm’s market debut could underwhelm, the steep plunge on Thursday was surprising.
Paytm's ₹ 18,300 crore IPO, which was the country's largest, was subscribed 1.89 times last week.
Vijay Shekhar Sharma, founder and CEO of One97 Communications, the parent firm of Paytm, was visibly crying with joy at the opening ceremony, later told Reuters that he was unperturbed by the slide and did not regret listing in India.
“One day does not decide what our future is,” he said. “It is a new business model and it takes a lot for somebody to understand it straightforward... there is a lot for us to bring to the markets and the market participants,” Sharma said.
According to analysts, Paytm’s costly valuations are the reason behind the dip in its stock price on its maiden trading day.
Paytm expects it could break even by late next year or early 2023, a source familiar with the matter told Reuters in July, though the company said in its prospectus it expected to make losses for the foreseeable future. Investors and analysts on Thursday appeared to lack faith.
According to a report by Reuters, “Paytm’s financials are not very impressive and the growth prospects seem limited. Obviously the company lacks a clear path to profits,” said Shifara Samsudeen, a LightStream Research analyst who publishes on Smartkarma.
The company reported a loss of Rs 3.82 billion ($51.5 million) in the quarter ended in June, wider than a loss of Rs 2.84 billion for the same period last year.
Although Paytm’s $2.5 billion offering was priced at the top of the indicative range, demand was much weaker than other recent stock sales, as Paytm has lost some market share to Google and Flipkart's PhonePe.