One97 Communications Ltd., the parent company of digital payments platform Paytm, had the worst stock market debut in at least two decades, as analysts expressed concerns about its profitability and shareholders revolted at the company’s high valuation.
Paytm’s shares plunged 27.25 percent on its first day of listing, the largest one-day drop in a decade for any scrip. Furthermore, compared to the pre-opening price of Rs 1,955 on the BSE, it was locked in a 20 percent lower circuit.
The stock closed at Rs 1,564.15, down 27.25 percent from the issue price of Rs 2,150 a share, after opening 9.1 percent lower and failing to cross the Rs 2,000 mark during the day. According to Prime Database, overtook Reliance Power Ltd.’s 17.22 percent loss on its initial public offering day in 2008. This is perhaps the worst market debut for a company with a threshold IPO of Rs 1,000 crore since 2000, with One97 Communications plummeting more than Coffee Day Enterprises Ltd.
The overall equities market’s downturn, high valuations, continuous loss in the previous fiscal years, expected strong competition in the digital payments space, and lower-than-expected subscription to its IPO are among the primary reasons that spoilt Paytm’s show today.
Vijay Shekhar Sharma, Founder and Chief Executive Officer of Paytm, told BloombergQuint, “New-age business models take time to be understood by the common market. So, I’m totally, perfectly happy. We aren’t…driven by stock markets, because share prices are run by…opinions of buyers and sellers, which we have no influence on.”
The Bombay Stock Exchange (BSE) listed shares of the digital payments giant for Rs 1,955 a share, a 9.06 percent drop to the issue price of Rs 2,150. The shares were trading on the BSE at Rs 1,694, Rs 456, or 21.21 percent below the issue price at 11:10 a.m.
In comparison to the tremendous buzz created before the issue was announced, Paytm’s Rs 18,300-crore offer was just 1.89 times subscribed. Non-institutional investors showed little interest in the offer, as their portion was only 24 percent subscribed. Qualified institutional investors retained shares only 2.79 times the reserved allocation, while retail investors’ portion was booked 1.66 times.
Paytm’s initial public offering (IPO) includes a fresh issue of equity shares worth Rs 8,300 crore and an offer for sale (OFS) of shares worth up to Rs 10,000 crore. Vijay Shekhar Sharma, the founder of the OFS, liquidated his stakes worth over Rs 402.65 crore. The proceeds from the share sale would be used to expand the company’s payment infrastructure, as well as for new business initiatives and acquisitions.
Paytm secured Rs 8,235 crore (~$1.1 billion) in the largest anchor round in India on November 3. The anchor round was oversubscribed ten times by investors such as Blackrock, which invested Rs 1,045 crore, alongside Canada Pension Plan Investment Board (CPPIB) (Rs 938 crore), Aditya Birla Mutual Fund (Rs 555 crore), and GIC (Rs 533 crore).