Leading digital payments platform Paytm's parent One 97 Communications traded at the lowest premium among the initial public offerings (IPOs) currently available for trading in the grey market.
The grey market is an unofficial platform wherein IPO shares start trading with the announcement of IPO price band till the debut of the company on the BSE as well as NSE.
Paytm IPO shares were trading at Rs 2,180 each in the grey market, a premium of only Rs 30, or 1.4 percent, over the final issue price of Rs 2,150 a share, as per IPO Watch and IPO Central.
This premium has been gradually falling as Paytm approaches listing day.
The stock was trading at Rs 2,300 a share in the grey market on November 7, a premium of Rs 150 or 7 percent over the issue price, which fell to Rs 80 on the opening day of the IPO and further to Rs 40 on the issue closing date (November 10).
Experts feel the tepid response to the public issue against elevated expectations could be one of reasons for the decline in premium.
“We have seen the grey market premium (GMP) declining consistently and the same is at around Rs 30 as of now. In my view, the GMP has seen a fall because the IPO has not received that great a response. However, the expectations from the IPO were sky high over the past few months. This signalled that enough supply would be available in the secondary market and that, too, at a discounted rate and hence the fall in the GMP,” said Gaurav Garg, head of research at CapitalVia Global Research.
One 97 Communications, which launched the country’s largest public issue of Rs 18,300 crore, is set to debut on the bourses on November 18. This would be the 49th listing in 2021.
The offer compcomprised a fresh issue of Rs 8,300 crore and an offer for sale of Rs 10,000 crore by several shareholders, including founder Vijay Shekhar Sharma.
The fresh issue proceeds are going to be utilised for growing and strengthening the Paytm ecosystem and investing in new business initiatives, acquisitions and strategic partnerships, the company said.
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The offer received a tepid response from investors and was subscribed 1.89 times during November 8-10. Qualified institutional buyers and retail investors helped the issue get subscribed, putting in bids 2.79 times and 1.66 times the portion set aside for them, respectively, while non-institutional investors bought only 24 percent of the shares reserved for them.
“It is a loss-making company with a loss of Rs 4,230.9 crore in FY19, which was reduced to Rs 1,701 crore in FY21. As India is buoyant on digitalisation, we expect the company to benefit from the same in the long run. Also, new acquisitions and strengthening of the Paytm ecosystem will be beneficial for the company. Hence, we recommend only aggressive investors with a long horizon to stay invested in the IPO,” said Aayush Agrawal, senior research analyst, merchant banking, at Swastika Investmart.
One 97 Communications has been making a loss as per the financials available in the prospectus but this has been narrowing.
In FY21, the consolidated loss was at Rs 1,701 crore against a loss of Rs 2,942.4 crore in FY20 and Rs 4,230.9 crore in FY19, while there has been a bit of volatility in revenue which was at Rs 3,186.8 crore in FY21 against Rs 3,540.7 crore in FY20 and Rs 3,579.7 crore in FY19.
During the June 2021 quarter, the company posted a net loss of Rs 381.9 crore against a loss of Rs 284.4 crore in the corresponding period a year earlier. Revenue in the same period increased sharply to Rs 948 crore from Rs 649.4 crore.
“The grey market premium of the company is the lowest compared to most of the recently listed IPO stocks. As a major portion of the issue is offer for sale, we expect the shares to list in a flat ambit with a negative close at -5 percent to -10 percent,” said Agrawal.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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