The Paytm IPO has been in the news for months, but it failed to live up to the anticipation on the day of its public offering.
One97 Communications, the parent firm of India's largest digital payments startup, debuted on Indian stock exchanges on November 18, 2021. From the offering price of Rs 2,150, its share price dropped by up to 26% to 1,603.92 rupees ($21.62) in the morning.
Although it recovered marginally later, it remained at a 9 percent discount. The shares closed today at Rs1,564, down more than 27%.
Paytm has led the country's digital payments industry, notably since the demonetisation operation in 2016. It is backed by numerous global marquee investors. While the initial public offering had all the makings of a blockbuster, the shares were only 1.89 times oversubscribed—2.79 times by skilled investors and 1.6 times by average investors.
From the start, there were numerous red flags on the offer.
Paytm's issues were always on display
Analysts cited the business's expensive values for a corporation that had not produced a profit for the previous eight years. Paytm merely cut costs this fiscal year, resulting in a much narrower loss of Rs1,596 crore compared to the previous year.
Profitability, on the other hand, is still a long way off.
Furthermore, Paytm has spread itself too thin over the years, branching into areas like as payments, financial services, travel, and movie ticketing, as well as fantasy sports and e-commerce. This, too, did not provide the expected results.
"Paytm's dabbling in various business lines prevents it from being a category leader in any business except wallets, which are becoming irrelevant as UPI payments take off... As a result, we have concerns about its capacity to achieve scale while being profitable," stated Macquarie Research in a note to investors.
Competitors with substantial pockets, such as Google Pay and Walmart-owned Flipkart's PhonePe, offered further obstacles.
What should you do if you've been issued Paytm shares?
Investors who have been alloted Paytm shares should book losses and quit, according to stock market analysts. They suggested more promising choices for anyone looking to add a fintech stock to their portfolio.
"Holding this stock isn't going to benefit you." Investors will not be able to exit at a greater price if the listing is poor. A K Prabhakar, head of research at IDBI Capital, told the Business Standard newspaper, "Book a loss here and get out of the stock."
One97 Communications was given a "underperform" rating by Macquarie Research ahead of its IPO, citing a lack of concentration and direction in the company's business plan.
Competition, according to the broking business, is likely to hinder medium-term growth. "Paytm can't generate significant money as a distributor until it lends," it claimed in a study.
