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With 27% fall on debut day, Paytm emerges as biggest loser among IPOs listed in a decade

Experts largely believe the companies in the tech business should be considered for long term instead of short term.

November 18, 2021 / 07:53 PM IST

It was a black day for Paytm, formally known as One 97 Communications, as the stock crashed 27.25 percent, the biggest-ever fall in a decade for any scrip on the listing day. In addition, it was locked in 20 percent lower circuit in comparison to the pre-opening price of Rs 1,955 on the BSE.

The stock settled at Rs 1,564.15, down 27.25 percent compared to the issue price of Rs 2,150 per share, while it opened 9.1 percent lower, which meant it could not cross even the Rs 2,000-mark during the day.

The weakness in overall equity market, high valuations, consistent loss in last financial years, expected tough competition in the digital payments segment, and less than expected subscription to its IPO are among key reasons that spoiled the Paytm show today.

Paytm's Rs 18,300-crore offer was subscribed only 1.89 times against the sky-high hype created before the issue getting launched. Qualified institutional investors bought shares only 2.79 times the reserved portion and retail investors' portion was booked 1.66 times, while non-institutional investors did not show great interest in the offer as their portion was subscribed only 24 percent.

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"Businesses like Paytm are always long-term stories which focus on market share in initial years of operation rather than on profits. Paytm is expected to have positive cash flow by 2030, which is a real long gestation period, hence most HNIs & Institutional Investors have given a pass to Paytm IPO," says Amit Jain, Co-Founder and CEO at Ashika Wealth Advisor.

Paytm registered the biggest-ever loss among IPOs that have listed in the last 10 years. Healthcare Global Enterprises, Quick Heal Technologies and Karda Construction were the next biggest losers, reporting around 21 percent loss each on their listing days.

Further, Coffee Day Enterprises, CL Educate, ICICI Securities, UTI Asset Management Company, Kalyan Jewellers India, Bharti Infratel, IRCON International, Monte Carlo Fashions, Windlas Biotech, Pennar Engineered Building Systems, Garden Reach Shipbuilders & Engineers, and ICICI Prudential Life Insurance Company had declined more than 10 percent on their debut days.

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Note: All Stocks Data, except One 97 Communications, Has Been Taken From Chittorgarh. We have considered stocks which fell more than 10 percent on listing day for the story.

Experts largely believe the companies in the tech business should be considered for long term instead of short term.

"We advise our investors that fundamentally strong & profitable companies in the tech business are bound to grow, hence investors can bet on the long-term perspective. While loss-making companies with a major offer for sale portion of the issue is a risky investment like Paytm, the Future of such companies will depend on their upcoming results," says Amit Pamnani, Chief Investment Officer & DGM for Investment Banking at Swastika Investmart.

Also read - Nightmare day for Paytm as stock cracks 27% on debut. What should investors do now?

Paytm has raised Rs 18,300 crore from its public issue, the biggest-ever money raised by any company through IPO in the history of Indian capital markets. The offer consisted of a fresh issue of Rs 8,300 crore and an offer for sale (OFS) of Rs 10,000 crore by several selling shareholders.

It is the largest payments platform in India with a gross merchandise value (GMV) of Rs 4.03 lakh crore in FY21, having an overall mobile payments transaction volume market share of approximately 40 percent, and wallet payments transaction market share of 65 -70 percent in India as of FY21.

One 97 Communications had posted a consolidated loss of Rs 1,701 crore for full year FY21, which was lower than the Rs 2,942.4 crore loss posted in FY20, and a loss of Rs 4,230.9 crore in FY19. Total income, at Rs 3,186.8 crore, for the financial year FY21, declined compared to Rs 3,540.7 crore in FY20 and Rs 3,579.7 crore in FY19.

On a quarterly basis, consolidated loss widened to Rs 381.9 crore in Q1FY22, against a loss of Rs 284.4 crore in Q1FY21. But the company has shown significant growth in revenue, at Rs 948 crore, in Q1FY22, compared to the Rs 649.4 crore in the corresponding quarter of last fiscal.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Sunil Shankar Matkar
first published: Nov 18, 2021 06:59 pm
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