Shares of One97 Communications Ltd., operator of India’s biggest fintech platform
that shot into the limelight after demonetisation, hit the lower circuit of 20%—Rs 1,564.00 apiece at 2:56 pm on its listing day. That brought to a halt trading of the company’s stock and eroded its market capitalisation by nearly a third compared to its IPO valuation of Rs 1.50 lakh crore ($20 billion). The Paytm stock had listed at Rs 1,955.00—a discount of 9% from its issue price of Rs 2,150.
In comparison, shares of its new-age peer Zomato Ltd.
had hit the upper circuit on listing day, ending the trading session 66% higher. Shares of Nykaa’s parent FSN E-Commerce Ventures Ltd.
nearly doubled from its issue price on market debut.
“I hope the Paytm story can inspire entrepreneurs, even for the ones who do not have the background, but I hope this inspires them that they can do it,” Sharma said during the listing event at the BSE in Mumbai on Thursday. “I believe India is meant for stories like this and many more stories like this to come up.”
Paytm Group’s CFO Madhur Deora said his company has done what “many said it can’t be done”. “We have the bluest of blue-chip investors from the world and one million retail investors with us,” he said.
Investors, however, questioned the company’s valuations and path to profitability.
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Even before the listing, Macquarie Capital Securities (India) Ltd.
initiated coverage on the company with an underperform rating and a price target of Rs 1,200, implying an over 40% downside from the IPO price.
“We believe Paytm’s business model lacks focus and direction,” analysts Suresh Ganapathy and Param Subramanian wrote in a report issued before the trading debut. “Unless Paytm lends, it can’t make significant money by merely being a distributor. We therefore question its ability to achieve scale with profitability.”
India’s biggest-ever IPO earlier this month as a symbol of the country’s growing appeal as a destination for global capital, particularly for tech investors looking for alternatives to China. Retail investors
who piled into the offering are now sitting on heavy losses, alongside global money managers including BlackRock Inc. and Canada’ CPPIB.
The question now looming over the $3.5-trillion stock market is whether the optimism that drove IPO fundraising and the benchmark S&P BSE Sensex to record highs has gone too far. “This kind of a plunge, frankly, has come as a surprise considering the euphoria surrounding the primary market,” Yasha Shah of Samco Securities Ltd said.
ETtech’s Apoorva Mittal and Digbijay Mishra contributed to this story.