Скачать или смотреть Business News #57 || How Paytm’s weak stock market debut impacted investors

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The stock market debut of One97 Communications Limited, Paytm’s parent firm, proved to be a big disappointment for investors on Thursday. Hopes were high given the fact that it was the biggest initial public offering (IPO) in India’s history at Rs 18,300 crore, but the high-profile market debut turned into a disaster.

The company's stock sank nearly 28 per cent, hitting the lower circuit, due to criticism about the company’s expensive share valuation and lack of profits. The weak listing came as a blow to Paytm investors who lost a huge amount of money on paper. As of Thursday’s closing, Paytm’s plunge wiped out Rs 38,000 crore from the total market capitalisation.

Paytm’s stock opened at a discount of 9 per cent on the Bombay Stock Exchange (BSE), compared to the issue price of Rs 2,150. The situation worsened over the intraday trading session as the stock plunged nearly 28 per cent at closing. It was one of the IPO listings among recent ones.

Nikhil Kamath, co-founder of Zerodha Broking Limited told Bloomberg that the euphoria around IPOs in India was supported by the bull-run in stocks, adding that people got carried away.

However, Paytm founder Vijay Shekhar Sharma remains optimistic about the future despite the weak listing. Suggesting that the slump is not an indicator of the value of the company, he said the company is in it for the long haul.

While weak IPOs are not always indicators of how the stock performs over the long-term, the concern in Paytm’s case is profitability. The company has failed to register a profit in all the years of its operation.

Besides, Paytm’s business model has also faced questions from experts as it faces steep challenges from competitors like Google Pay, PhonePe and others.

Analysts are worried that Paytm’s weak debut will have an impact on future IPOs, especially startups.

The massive dip in Paytm’s shares indicates the evolving market condition and higher concern among investors about IPO valuations. Experts feel that future tech IPOs could face some amount of pessimism due to Paytm’s tepid debut on Dalal Street.

However, most other new-age tech companies that went public before Paytm did well, including Zomato, Policybazaar, Nykaa and more. So, it remains to be seen if Paytm’s weak listing has a domino effect on upcoming new-age startup IPOs.