Paytm's shares fall 27% on the first day of listing and it may fall even further, warn analysts

Paytm's shares fall 27% on the first day of listing and it may fall even further, warn analysts
BI India/ BCCL
  • Paytm’s IPO surpasses Coal India’s IPO that was executed in October 2010.
  • Paytm’s GMP was at ₹20 lower than the issue price of ₹2,150, on November 17.
  • The company listed at a market cap of $17 billion, even though it sought a valuation of $19.9 billion.
  • The Vijay Shekhar Shama-led company has raised ₹18,300 crore through this public issue.
One97 Communications, the parent of the digital payments giant Paytm, made its debut on the stock exchange on Thursday at ₹1,955 on the Bombay Stock Exchange. This is 9% lower than the issue price of ₹2,150. And, analysts at Macquarie have warned that the stock may go down a lot more before it becomes attractive.

Analysts at Macquarie, a global investment bank, have set the target price for Paytm at ₹1,200, that’s 44% below the price at which IPO investors got their shares. Macquarie cited the high price of the IPO and the intense competition from the likes of Amazon, Google and Flipkart for its pessimism around Paytm.

“People ask me how do you raise money at such a high price? I say, I don’t raise money on a price but I raise money on a purpose,” said One97 Communications founder and chief executive (CEO) Vijay Shekhar Sharma in his address before the listing ceremony at the BombayStock Exchange.

Paytm's shares were trading at ₹1,673 at 12:22 p.m., a discount of nearly 22%. The closing price for November 18 was ₹1564, which is 27% below the issue price.

Paytm is still bigger than Britannia, Bajaj Auto and Zomato

The Noida-based Paytm listed at a market cap of ₹1,26,737 crore ($17 billion), which is nearly $3 billion lower than the $19.3 billion-$19.9 billion valuation of the public issue.

The fear around the price had set in long before the listing. Paytm’s grey market premium (GMP) — a price at which the share prices are being traded at in the grey market — tumbled down from ₹130 on the first day of bidding on November 8 to a negative ₹30 on Wednesday (November 17).

This means that the traders in the grey market are willing to buy the shares at ₹2,130, about ₹20 lower than the issue price.

The initial public offering (IPO) by Paytm — owned by Vijay Shekhar Sharma-led One97Communication — is the biggest public issue India has ever witnessed and it surpassed Coal India’s public issue worth ₹15,000 crore executed a decade ago.

The company has raised ₹18,300 crore from this public issue, of which ₹8,300 crore was raised as a fresh issue. The remaining ₹10,000 crore was raised as offer for sale (OfS), giving partial exits to Alibaba’s Ant Group, Softbank and others.

Experts ask investors to wait it out before investing in Paytm's shares


Fresh investors should not invest in Paytm at the moment but wait for another 15 days for the stock to consolidate, Kranthi Bathini, Director - Equity strategy at WealthMills securities, told Business Insider.

“Serious investors need to wait for a couple of earning quarters and not jump into stocks like what happened in Nykaa,” he added.

Nykaa — which had a stellar debut on the stock market last week — crossed the ₹1 lakh crore market cap on the first day of listing. However, the company’s revenue declined to ₹1.2 crore in the July to September quarter, which is significantly lower than ₹27 crore it reported in the same quarter last year.

Paytm received bids for 9.11 crore shares versus the 4.83 crore shares up for sale, which means that the issue was oversubscribed by 1.8X. About a third of Paytm’s IPO shares were undersubscribed until the second half of the third day of bidding, on November 10. And, the grey market price of the shares kept declining.

CompanyIssue SizeBids Received
Paytm4.83 crore 9.11 crore
Coal India63 crore147 crore
Nykaa2.64 crore216 crore
PolicyBazaar3.45 crore57.24 crore
Paras Defence71.40 lakh 217.26 crore
Zomato 2,751 crore71.92 crore

Source: Stock exchange

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