Shares of Indian digital payments platform Paytm plunged more than 20% on their debut on the Mumbai stock market.
The company raised $ 2.5 billion in the country’s largest initial public offering (IPO).
Some investors have expressed concern about Paytm’s loss-making business model.
The company counts Chinese payment giant Ant and Japanese technology group SoftBank among its biggest supporters.
Paytm’s first-day slump comes as Asia’s third largest economy has been in an IPO frenzy as stocks near record highs. India’s benchmark BSE Sensex has risen nearly 25% since the beginning of this year.
Indian start-ups have attracted billions of dollars in funding this year as investors seek opportunities in the Covid-battered economy.
Even before Paytm’s record share price, Indian companies had raised a record $ 10.5 billion this year through IPOs in 2021 so far.
Shares in beauty retailer Nykaa took a leap in its debut last week as the Zomato food delivery app rose on its first trading day in July.
Rising valuations of Indian IPOs have prompted authorities to take steps to try to cool the market.
- Shares of Zomato in India rise on market debut
- India’s food delivery “unicorn” opens $ 1.2 billion IPO
On Tuesday, the country’s market regulator outlined plans to tighten rules on how companies can spend the money they raise from IPOs.
This came after the Indian central bank’s decision to impose limits on how much people can borrow to buy shares of a new listing.
Founded by Vijay Shekhar Sharma, who was once named India’s youngest billionaire, the Paytm platform was launched in 2010.
The company has quickly become synonymous with digital transactions in a country traditionally dominated by cash payments.
Paytm received a major boost from the push by Prime Minister Narendra Modi’s government to curb the use of cash, including the demonetization of nearly all banknotes in circulation five years ago. It also benefited from the fact that people became less willing to use physical money during the pandemic.
Nearly 22 million shop owners, shop owners, taxi and rickshaw drivers and other vendors in India now accept payments using the platform’s blue and white QR code stickers.
Last year, the company handled over $ 54 billion in transactions for its 337 million customers.
“A long way to profitability”
Nikhil Inamdar, trade correspondent in India, BBC News
Paytm’s lackluster debut wasn’t entirely unexpected after institutional investors took three full days to submit enough offers to cover all the shares on offer, although the magnitude of the slip surprised many.
There are three main factors that worry analysts about the company’s future: a long and confusing road to profitability, a very high valuation, and stiff competition in the payments market from Google, WhatsApp, and Walmart-backed phonePe.
There are also concerns that Paytm has dipped its toes into too many activities and lacks focus, inhibiting its ability to become a market leader in any of these areas.
Global brokerage firm Macquarie, which began hedging the stock today, gave Paytm an “underperforming” rating, saying it sees the potential for Paytm to drop more than 40% from its issue price.
Paytm’s weak debut performance stands in stark contrast to the 80% increase in openness that India’s other major Internet unicorn, beauty retailer Nykaa, saw on the day of its listing.
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