After covering the spotlight for offering the biggest IPO in India, Paytm shares got a horrendous response from the public. Well-known Digital firm & Paytm’s parent company One97 Communications launched the biggest IPO in India, but despite this grand offering, the shares couldn’t manage to last at least one full trading session on its market debut.
The shares were listed at a discount of 9% at Rs 1,955 on the BSE and it was closed at a disappointing price of Rs 1564.64 which was 27.24 % down from the IPO price. The trading for the shares was halted after it hit the lower circuit in the latter half of the market hours.
Market Capitalisation Of the Firm:
At current value, the market capitalization of this leading fintech firm reached out to Rs 1,01,399 Cr which is lower than the market expectation which was earlier valued at Rs 1,40,000 Cr
Paytm’s Founder Also Suffered Significant Loss
Vijay Shekhar Sharma- Paytm’s founder and CEO, also suffered loss. His 14% stake is now valued at Rs 14,000 Cr
Why Shares Got So Low?
1) Inflated Valuation:
According to Market experts, the Firm’s inflated valuation and large float were responsible for poor response.The IPO was generally termed overpriced.The issue price of the shares was Rs 2,150 but the anticipated price was lower than the actual debut price of Rs 1,955 which later on got much lower to Rs. 1564.64
2) Growth Prospects:
The Company’s growth prospects weren’t clear. The lending business is one of the most lucrative verticals in the fintech firms but according to the Institutional investors Paytm still didn’t get the license to enter the lending business which acted as a catalyst for the downfall of its share price
3) Macquarie Research
According to this research Paytm’s Valuation was 26 times higher than its price-to-sale ratio for the year 2022-2023.This Paytm’s valuation was termed expensive because the global benchmark is generally 0.3-0.5 times the price-to-sales growth ratio for fintech firms.
4) Higher Risk Appetite
According to the stock analysis, the company’s valuation was traditionally been decided by foreign investors which prefer higher risk appetite, whereas in India, Investments were made on conventional metrics like the profitability and earnings of the individual business firm and though Paytm growth prospects weren’t clear, So The public. generally resist investing in its shares.
5) Slower Subscription
The shares were fully subscribed only on its last day at 1.52 times, this also indicated the poor debut price.
6) Grey Market Factor
In Grey Market also the shares were listed at a significant discount price which gave hints to the investors about its downfall.
7). Existing Investors Exited Their Stake.
A huge Amount of money raised which was around 10,000 Cr was given back to the existing shareholders as they have exited their shares partly or fully.This imprinted a bad impression on the potential investors.
Is it worth investing in Paytm’s Shares?
According to the report of stock analyst,Paytm is currently leading in the online wallet segment. The competition has also tightened up in the fintech firm.And now most people prefer UPI-based payments due to which wallet payments are becoming less popular.
Also, it is not sure that how much the financial products like giving loans, mutual funds, and insurance will help Paytm in improving its profitability.The firm will likely come under pressure by the stiff competition and the rules & regulations.
As per Grey Market, The Premium price for this IPO keeps on fluctuating between 5-12%. The Company is in loss-making so investors need to invest cautiously