Paytm IPO scrapes through after two days of underwhelming response

• Paytm’s IPO has been oversubscribed on the third day of listing, however the response is still underwhelming compared to some recent IPOs.
• Bids have been placed for 9.14 crore shares versus 4.83 crore shares available for sale, as of 5:00 p.m.
• Media reports suggest that Paytm's GMP has fallen from ₹150 to ₹55 in the last one week.
• Paytm has been seeking a valuation of $19.3-19.9 billion with this public issue.

The initial public offering (IPO) of Paytm has been fully subscribed on the third pay of the public issue, after receiving an underwhelming response from the institutional investors in the first two days of the issue.

The company’s IPO was subscribed only 68% till 1:00 p.m, on Wednesday, according to the data updated on stock exchange. However, the offering was oversubscribed by 1.33 times or 133% by 1:47 p.m.

This massive difference was created solely by qualified institutional buyers (QIBs), who have subscribed to the IPO by two times. Notably, the portion reserved for QIBs was only subscribed by 46% till yesterday, November 9.

QIBs include foreign institutional investors, banks, financial institutions, insurance companies, mutual funds and others.

This is India’s biggest-ever IPO, surpassing Coal India’s public issue of ₹15,000 crore in October 2010.

The retail portion of Paytm’s IPO has been subscribed 1.66 times, according to the stock exchange. The portion reserved for Qualified Institutional Buyers (QIBs) has been subscribed 2.79 times and non-institutional investors have been subscribed 24%.

The retail portion of Paytm’s IPO has been oversubscribed since day one, whereas the non-institutional portion is still lagging behind.

As of 5:00 p.m, on November 10, Paytm has received bids for 9.14 crore shares versus 4.83 crore shares available for sale. The IPO has been subscribed 1.74 times by the same time.

Despite the over subscription, Paytm’s IPO is still underwhelming compared to other IPOs that were listed this year. The digital payments giant has also not been able to cross the subscription rate of Coal India.

Source: Stock exchange


“The payments space is highly competitive with consistently large outflows on marketing/customer acquisition. It is hard to identify PayTM as a clear winner in this rapidly evolving sector. It thus brings to question the future profitability outlook of the business and hence, a long term hold of the stock once it's listed. The IPO may not garner as much interest owing to lower listing gains given the subdued sentiment on business fundamentals,” Neha Khanna, director at investment banking and financial advisory firm Valpro said.

According to media reports citing market observers, Paytm (One 97 Communications) shares premium has slipped in the grey market and is commanding a grey market premium (GMP) of around ₹55 today, November 10. A Mint report noted that Paytm’s GMP has fallen from ₹150 to ₹55 in the last one week.

Despite being the biggest and the most sought after startup IPO in India, Paytm has received an underwhelming response from the investors.

Paytm’s shares are being offered at a price band of ₹2,080-₹2,150, and the lot size has been set at six shares. This means one lot would cost up to ₹12,900 at the upper price band.

Paytm — valued at $16 billion — was founded in 2010 and is one of the largest digital payments companies in India. The company is seeking a valuation between $19.3 billion to $19.9 billion with this public issue.

The valuation itself has been a point of contention for several stock brokerages. Marwadi Financial Services believes that Paytm's valuation is too demanding for a loss making company.

However, Angel One notes that Paytm is well positioned to gain from growth of digital payments. Therefore, the valuation is justified.

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