Paytm Crashes In Market Debut: Here's What Analysts Said

Digital payments firm Paytm crashed as much as 28 per cent in a weak stock market debut on Thursday, a week after the country's biggest-ever initial public offering (IPO)

Paytm Crashes In Market Debut: Here's What Analysts Said

Paytm is backed by Jack Ma's Ant Group, Japan's SoftBank, and Warren Buffett's Berkshire Hathaway

Digital payments firm Paytm crashed as much as 28 per cent in a weak stock market debut on Thursday, a week after the country's biggest-ever initial public offering (IPO). Paytm's IPO was subscribed 1.89 times last week. The stock opened for trading at Rs 1,950 on the NSE from its issue price of Rs 2,150. The shares extended losses as the stock hit an intraday low of Rs 1,560. On the BSE, Paytm stock opened at Rs 1,955.

Paytm is backed by Chinese tycoon Jack Ma's Ant Group, Japan's SoftBank, and Warren Buffett's Berkshire Hathaway, which together own around a third of the company.
 

Here's What Analysts Told NDTV On Paytm's Weak Listing:

Anurag Singh, Managing Partner at Ansid Capital, said, "It was quite expected. Although, looking at some of the other listings, didn't expect such a steep fall because prices of Zomato, Policybazzar, Nykaa are holding up. There's a bit of a demand and supply mismatch due to which the right price discovery isn't happening in lot of these new age IPOs. Paytm asks for a $20 billion valuation. On this valuation, it is saying that I'm 20 per cent of HDFC Bank, 40 per cent of Kotak Bank and I'm 65 per cent of Axis Bank. This is pure financial insanity and I don't think that this kind of pricing ever made sense et al."

Asked if the stock will bounce back, Mr Singh said, "No ... I'll be surprised (if it does) with this kind of interest. And, this is the problem of all of these frenzy IPOs, if it starts tumbling, then it takes all other IPOs together with it. If you're holding something and it keeps growing, investors have confidence but the moment it starts tumbling, I think that's where everybody becomes a seller."

Despite the dip in Paytm shares on debut, the company clocked the valuation of over Rs 1 lakh crore. Analysts pointed at the firm's expensive valuations as the reason behind the fall in stock price on its first trading session.

Ajay Bagga, Market Expert, and Investor, said, "Now, what we're seeing is loss-making, profit-less companies are holding out the carrot of prosperity to the retail investors in the secondary market, which is a dangerous move because you can't value these companies on the normal parameters (such as cash flows, margins and profits). All these companies are saying don't try to ask us about profits, look at the growth that we're bringing in, we have a very huge runway and invest in us based on the growth. So, Paytm was being valued at 23 times of price to sales (P/S). I don't think you can value a financial company on P/S as such."

He further stated, "The valuations of Paytm were very high and steep. The fundamentals were not in keeping. It was the India growth and digital growth story which was sold and clearly, the markets have turned skeptical about it. Be wary, look at the valuations, and see what you are buying. Don't go by the momentum and the frenzy that's gripping the markets right now."

Although Paytm's Rs 18,300 crore IPO was priced at the top of the indicative range, the demand was much weaker than other recent stock sales, as Paytm has lost some market share to Google and Flipkart's PhonePe.

Ravi Singh, Vice-President, and Head of Research, ShareIndia, said, "We advise the investors, after looking at the overall valuations and earlier losses of Paytm, to book their positions and wait for Rs 1,700-1,600 levels for fresh investment. Retail investors may remain cautious as the overall market is in profit-booking zone pushing maximum stocks in downside territory. Paytm's future growth is a key to watch for long-term investors."

Several market participants saw the stock's weak debut as a sign that investors had become disillusioned with a recent string of IPOs with inflated valuations.

Manoj Dalmia, Founder and Director, Proficient Equities Ltd. said, "Digital payments brand Paytm got listed at a discount over its issue price. Reasons for the weak listing included: The company is overvalued at a price to sales (P/S FY23) value of 26 times, compared to global peers at 0.3-0.5 times PSG (price to sales growth ratio); 75 per cent of promoters are from other countries and are selling stakes by OFS (offer for sale) worth Rs 10,000 crore which is more than 50 per cent of IPO value; and it is not a market leader in any business."

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