Paytm shares tank over 9% as 4.5% of its equity changes hands

• Paytm shares tanked over 9% in the first hour of trade on Thursday, as 4.5% of the company’s equity shares were traded in a block deal.
  
• According to data from NSE and BSE, the total trading volume in Paytm’s shares stood at a little over 47 million as at 10 am.
  
• Separately, a block deal involving 29.5 million shares, amounting to ₹1,660 crore was executed.
  

Paytm shares tanked over 9% in the first hour of trade on Thursday as 4.5% of the company’s equity shares, totalling to 29.5 million, changed hands in a block deal.

Shares of Paytm fell as much as 10% in the first hour of trade. As of 10 am, Paytm’s shares were trading at ₹545, down by 9.4% when compared to the previous closing price of ₹601 per share.

According to data from NSE and BSE, the total trading volume in Paytm’s shares stood at a little over 47 million as at 10 a.m. It is worth pointing out that block deals are not included in the trading volumes on stock broking platforms.

A block deal involving 29.5 million shares, amounting to ₹1,660 crore was executed, although the seller details are not known yet.

Earlier, reports suggested that the Masayoshi-led SoftBank is planning to sell a stake worth $215 million in Paytm, which is nearly 4.5% of the company’s equity. At the end of September, SoftBank held a 17.45% stake in Paytm.

The lock-in period for pre-IPO investors of Paytm expired on November 15.

Overall, Paytm’s shares are down 74.7% since listing, from its issue price of ₹2,150.

Paytm’s lending and merchant businesses drive revenue growth in Q2, but loss widens

Paytm reported a 76% rise in revenue on a year-on-year basis to ₹1,914 crore driven by growth in lending and merchant businesses. However, its loss widened 20.7% to ₹572 crore.

Paytm’s revenue from merchant services stood at ₹624 crore in Q2, up 12% sequentially and 56% YoY. The devices used by merchants also increased during the quarter to 4.8 million, from 3.8 million in the previous quarter.

Paytm’s merchant business model consists of subscription revenues, merchant discount rate (MDR), and advertising revenue. In addition to this, since UPI payments attract zero MDR from merchants, the government reimburses the company.

Analysts remain optimistic about Paytm achieving adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) profitability in FY24, as promised by the company.

“We expect margins to further improve, and forecast FY24 to be the first full year of adjusted EBITDA profitability for Paytm,” stated a report by Goldman Sachs.

Stocks which came under selling pressure on lock-in expiry

Stocks of several companies have come under selling pressure on the expiry of the lock-in period, including Zomato, Delhivery, Policybazaar-parent PB Fintech, among others.

Nykaa managed to escape this by issuing bonus shares, thereby reducing the available shares to trade to just 17%, thanks to a bonus issue of 5 shares for every 1 share held.

To recall, the lock-in period for Zomato’s pre-IPO investors ended on July 25 this year, tanking the stock by as much as 14.3% to an all-time low of ₹40.6 a share.

Later this month, Delhivery, Tarsons Products, and Go Fashion are amongst the companies whose lock-in period will expire.

What is a block deal?

A block deal is a single trade in which more than 5 lakh shares, or ₹10 crore in value, are transacted. These block deals are executed by investment bankers or brokerages on behalf of the owner.

Block deals are executed in two windows of 15 minutes each – between 8:45-9 am, and 2:05-2:20 pm.

Usually, institutional investors and high net worth individuals enter into block deals, while retail investors use regular trading channels.

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