Paytm shares plummeted for a second day on Monday. It wiped out almost $7.75 billion from its market value after its $2.5 billion initial public offerings, marking one of the worst debuts ever by a major technology company.
On Thursday, Paytm shares made a weak debut in the secondary market, with One97 stock ending 27 percent lower for the day compared to the issue price. The Paytm IPO, though oversubscribed, was booked 1.9 times. Paytm became one of the worst Dalal Street debutants of recent times.
After the listing on Thursday, Paytm Founder and CEO Vijay Shekhar Sharma said that the listing day price is not a true reflection of the company’s opportunity and scale.
“People will take time to understand the business model. The fact that a payment company can do financial services like private insurance and wealth is something new to the Indian stock market. Over the period it will show up what this business model and scale is,” said Sharma.
At 10:15 am, Paytm shares traded 9.68 percent lower at Rs 1,409.65 on the BSE, having fallen as much as 10.4 percent earlier in the day. The counter continued to bear a deserted look as the stock declined 13.66 per cent to Rs 1,350.35 on BSE. On NSE, it tumbled 13.39 per cent to Rs 1,351.75.
The market capitalization of the company slid to Rs 87,860.52 crore from its IPO valuation of Rs 1.50 lakh crore demanded at Rs 2150 issue upper price brand. So far, investors have lost over Rs 62,800 crore in the issue. It faces criticism of overpricing the IPO and not having a clear path to the profitability of even a business model going ahead.
After the weak debut at Indian bourses, Thursday Paytm released financial details for the month of October. It includes the critical period ahead of the Diwali holiday. Gross merchandise value rose 131 per cent to 832 billion rupees ($11.2 billion) for the month, the company said. Loan disbursal, which analysts see as key to Paytm turning profitable, increased more than 400 per cent to 6.27 billion rupees.
Global brokerage report Macquarie in a report released on Paytm’s listing day had valued the stock at Rs 1200 at a valuation of 0.5 times price to sales growth multiple on December 23 annual sale.
“Paytm has been a cash-burning machine, spinning off several business lines with no visibility on achieving profitability. Unless Paytm lends, it can’t make significant money by merely being a distributor,” said the Macquarie report.
Brokerage Zerodha’s Nikhil Kamath of Zerodha is also bearish on the company and wary of “ridiculous” valuations. Kamath thinks there is a need to find a balance between high growth offered & “crazy” valuation.
According to market analysts, concerns over valuation weighed on the stock.
Even after the 27% correction on listing day, Paytm is valued at 19.12 times FY23 estimated price to sales. In comparison, global companies like Paypal is at 7.55 times and Afterpay is at 14.26 times