One97 Communications’ Paytm stock, which was just listed on Dalal Street a day ago, had a terrible opening and continued to decline throughout the trading day.
Due to the poor market, the share price fell to an all-time low of Rs 1,586 or 26.2% below the upper end of the issue price of Rs 2,150.
This caused India’s largest IPO to suffer a worse-than-expected valuation drop of nearly a quarter on its first day of trading. Earlier this month, with approval from Sebi, Paytm floated an IPO valued at Rs 18,300 crore.
Experts say that, despite Paytm’s dominant market share, the company’s demise was precipitated by the company’s high valuation, muted investor response, and loss-making business.
When the stock first went public, it opened at a lower price than many had hoped. On the Bombay Stock Exchange, shares of Paytm opened at Rs 1,955, down 9.1 percent from the upper end of the issue price of Rs 2,150. Analysts cited by MoneyControl said that only risk-takers should invest in the company.
As a result of investors’ lackluster reception of Paytm’s initial public offering (IPO), the company was unable to attract significant interest in its stock.
According to stock exchange data, by the end of the final day of bidding, the Paytm IPO was 1.89 times subscribed.
Paytm’s parent company, One97 communications, received bids for 9.14 crore shares, compared to the 4.83 crore shares that were available for purchase.
To put this in perspective, the qualified institutional buyer portion was oversubscribed by 2.79 times, while the retail buyer portion was oversubscribed by 1.66 times. Two-fourths of the stock reserved for retail investors was purchased.
MoneyControl cites unnamed experts who say that Paytm’s loss-making history is to blame for the company’s lackluster reception. The company was an early pioneer in the field of digital payment processing, and today it enjoys a large customer base and high brand recognition. While aggressively priced, the company is still losing money.
Consequently, we saw a lukewarm response in terms of subscriptions,” Santosh Meena, head of research at Swastika Investment, was quoted as saying.
Non-institutional investors only subscribed at a rate of 0.24 times the size of the offering, while the retail portion was only 1.66 times oversubscribed. Equally important, the company is losing money,” said Equity99 co-founder Rahul Sharma.
There have been predictions that Paytm won’t turn a profit anytime soon. Company founder Parth Nyati believes only risk-takers should own Trading shares.
We recommend that new investors compare Paytm’s performance to that of its competitors. A correction could be on the horizon, he was quoted as saying, because the company “sought the high valuation on the strength of its brand.”
The SoftBank Group Corporation Has Reduced Its Holdings In Paytm
- Reports on Wednesday suggested that SoftBank will sell its stake in One97 Communications Ltd through a $200 million block deal.
- SoftBank had a 17.5% stake in Paytm as of Sept 30. The shares were expected to be offered to institutional investors at Rs 555 to Rs 601.45.
- SoftBank sold 29.5 million shares, which is about a 4.5% stake in the company via a single block on the NSE today. It will fetch them $200 million approximately.
- The sale follows the end of one-year mandatory lock-in for pre-IPO investors in Paytm. As the lock-in has expired, 85.76% of the outstanding shares are now free to trade.
- SoftBank has invested $1.6 billion into the company over the years. It is among its biggest investments in India. At Paytm’s current share price, the 17.5% stake SoftBank held in the company before Thursday’s share sale was worth only about $900 million.
Paytm Stock: On The Radar Of Brokers
Analysts warned last week that the stock could drop after earnings because the lock-in period ends on November 15. Please review our in-depth analysis of the exclusivity clause.
With a higher Opex margin for the quarter and the pre-IPO investor lock-in opening on the 15th of November 2022, CLSA has maintained its ‘Sell’ call for Paytm with a target price of Rs. 650.
In light of the stock’s continued strong growth of GMV and revenue in the second quarter, which was driven primarily by an increase in loan disbursements,
Morgan Stanley has maintained its ‘equal weight rating on the stock and set its price target at Rs. 785. Positive news for Paytm was reported by the research firm because the company’s contribution margin increased on a QoQ basis despite a 9% drop in the Adj margin.
Paytm Money is an approved broker and investment advisor with the Securities and Exchange Board of India. A depository participant of CDSL, as well as a member of the BSE and NSE stock exchanges, the company is a publicly traded entity. The Securities and Exchange Board of India (SEBI) oversees its activities as a stock broker.
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