Ant Group-backed ,Paytm’s 18,300-crore public issue got a decent 1.89 times subscription and the stock registered a fall of over 27 per cent from the issue price of ₹2,150. On the BSE, Paytm stock opened for trading at ₹ 1,955 and then ended the day at ₹1,564. This was greater than miner Coal India’s ₹15,000 crore offer a decade back.
Paytm’s expensive valuations as the reason behind the fall in stock price on its first trading session. The interesting thing is Paytm has about 45x sales, and a market capitalisation of Rs 1.4 lakh crore, Paytm stock is not cheap, especially considering that the company has never turned a net profit, and is not likely to do so soon. Paytm shares crash 28% on debut after India’s biggest-ever IPO.
The company commanded a market valuation of ₹1,01,399.72 crore on the BSE. With the decline in the stock price, the company’s market valuation eroded by ₹37,600.28 crore. Despite the dip in Paytm shares on debut the company clocked the valuation of over ₹ 1 lakh crore.
Paytm allocated shares worth ₹ 8,235 crore to more than 100 institutional investors, including the government of Singapore, ahead of the country’s largest stock market listing. Paytm pushed up both the price and the size of the stock offering to the breaking point. It would be the reason of the stock crash.
Paytm garnered interest from 122 institutional investors who bought more than 3.83 crore shares for ₹ 2,150 apiece, according to a regulatory document dated November 3.
Zerodha Co-founder Nikhil Kamath spoke to Bloomberg about Paytm’s stock market debut and said, “There has been a euphoria around IPOs in India, supported by the bull-run in stocks and people got carried away by it.” He added, “For Paytm, the runway for the profitability is too long and doesn’t justify the far-fetched pricing.” Paytm’s ₹18,300-crore IPO is India’s biggest so far.
Market insider says, Paytm stock is very expensive. At 20% of HDFC Bank, 40% of Kotak Bank, I think Paytm stock is overpriced. I would go back to Paytm’s last major funding round before the pandemic, which is when the company raised money at $8 billion valuation in the year 2017, instead of about $19 billion now. It’s the same for Policybazaar, where I think the company’s fair value is at about 25% of the current price, going by its 2018 funding.
Info Edge Founder Sanjeev Bikhchandani, in an interview following Paytm’s IPO and its shares falling 27% below IPO price on Thursday, said startup founders should focus on building value, not valuation. “A higher share for institutional players in loss-making company IPO is a good idea,” he said. “Tech IPO market not more overvalued than broader markets,” Bikhchandani added.
