MUMBAI, Nov 18 (Reuters) – Shares in India’s Paytm (PAYT.NS) plummeted 24% in their maiden day of trade, with investors questioning the loss-making digital payments firm’s business model despite it having just completed the country’s largest-ever IPO.
Shares were changing hands at 1,645 rupees in morning trade versus the offer price of 2,150 rupees, valuing the Ant Group-backed company at around 1.07 trillion rupees ($14.4 billion).
If it were to fall as far as 1,560 rupees, it would hit the exchange’s 20% circuit breaker, at which point trading would be halted for the day.
“Paytm has been loss-making and there is no sign to turn profitable in near future,” said Parth Nyati, founder of Indian trading platform Tradingo.
Paytm, which also counts SoftBank (9984.T) 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 on offer, or 1.89 times. read more
Analysts at Macquarie Research said in a note to clients that Paytm’s business model lacked “focus and direction” and initiated coverage with an underperform rating. “Achieving scale with profitability a big challenge,” the note said, calling the company a “cash guzzler”.
Many market participants saw the stock’s crash on its debut as a sign that investors had become disillusioned with a recent string of IPOs with inflated valuations.
Paytm’s listing could bring “an end to obnoxious pricing in IPO markets”, Mumbai-based investment advisor Sandip Sabharwal said, adding that too many of the companies did not have a clear path to profitability.
Engineering graduate Vijay Shekhar Sharma founded Paytm in 2010 as a platform for mobile recharges. The company grew quickly after ride-hailing firm Uber (UBER.N) listed it as a quick payment option in India and its use swelled further in late 2016 when New Delhi’s shock ban on high-value currency notes boosted digital payments.
Paytm’s success has turned Sharma, a school teacher’s son, into a billionaire with a net worth of $2.4 billion according to Forbes. Its IPO has also minted hundreds of new millionaires in a country where per capita income is below $2,000. read more
($1 = 74.3550 Indian rupees)
Reporting by Nupur Anand in Mumbai, Sankalp Phartiyal in New Delhi and Vishwadha Chander in Bengaluru; Additional reporting by Chandini Monnappa, Abhirup Roy and Savio Shetty; Editing by Edwina Gibbs
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Read More: Shares in India’s Paytm plunge 24% in market debut, business model