PAYTM’S US$2.5 billion initial public offering (IPO) was fully subscribed on the last day of India’s biggest IPO, following a relatively slow start as analysts raised concerns about the firm’s profitability.
The digital payments provider received bids for 1.2 times the number of shares on offer as of 1:44 pm in Mumbai, according to data on the stock exchange’s website.
While the portion set aside for retail investors was oversubscribed early, that for institutional buyers hit the finish line on Wednesday (Nov 10) and non-institutional investors such as wealthy individuals and companies purchased about 0.1 per cent of the shares offered to them.
The performance pales in comparison with recent IPOs including beauty startup Nykaa or food-delivery platform Zomato – which were fully sold on Day 1 – and contrasts with strong demand from anchor investors whose allocation was oversubscribed more than 10 times last week. A key focus is when Ant Group-backed Paytm will turn profitable enough to justify a share price of as much as 2,150 rupees that the company is seeking.
“These are very high-risk bets,” Rakhi Prasad, an investment manager at Alder Capital in Mumbai, said in an interview to Bloomberg TV on Tuesday (Nov 9). The company has the strength of being the largest digital payments network from a merchant’s perspective but has “a long runway” to capitalise on that and generate some profits, she added.
Nykaa’s shares soared some 96 per cent on debut Wednesday, while Zomato has gained about 80 per cent since it listed in July.
Paytm had reported a 10 per cent drop in revenue during the year ended March 2021, after intensifying competition from Walmart’s Flipkart and Amazon.com cut its e-commerce and cloud sales by the same amount.
Even though the company has slashed marketing costs and is freeing up cash, it continues to post losses, Reliance Securities analyst Vikas Jain wrote in a note dated Nov 6.
“Given the market euphoria and the flush of liquidity, the issue will be fully sold but we don’t expect big manifold subscriptions given the large size of the share offering and also some investor fatigue after a stellar run for most IPOs this year,” Aditya Kondawar, chief operating officer at JST Investments, a financial advisory company in Mumbai, had said on Tuesday. “Investors are turning a bit cautious as economies around the world are now looking at normalising easy policies that had been flooding the market with liquidity.” BLOOMBERG
(Except for the headline, this story has not been edited by The Finance World staff and is published from a syndicated feed.)