Biggest IPO, biggest crash: Paytm tanks 27% on Day 1

After India’s largest-ever preliminary public providing (IPO), mum or dad One97 Communications set one other file on debut—the largest drop on opening day for share gross sales value greater than Rs 1,000 crore.

The inventory listed at Rs 1,950, a reduction of 9.3% to its supply value of Rs 2,150, and closed at Rs 1,564.15, down 27%. That is the primary of six current startup IPOs to record beneath the supply value. Anil Ambani-controlled Reliance Energy had plunged 21% on debut in February 2008 after an Rs 11,700 crore IPO.

Traders misplaced practically Rs 5,000 crore of their Rs 18,300 crore funding within the One97 IPO. Whereas institutional traders misplaced Rs 4,254 crore, retail traders’ web loss amounted to Rs 567 crore. Excessive web value induvial traders misplaced Rs 166 crore.

On the closing value,
One97 commanded a market capitalisation of Rs 1.01 lakh crore ($13.3 billion), lower than the $16 billion valuation at which the corporate raised round $1 billion in November 2019. Lately listed Zomato commanded a market capitalisation of Rs 1.22 lakh crore on Thursday.

“Each IPO value and the listed value had been determined by the traders and never by the businesses, in contrast to non-public rounds,” mentioned One97 founder and CEO Vijay Shekhar Sharma. “We essentially consider that payments-led monetary companies is an unimaginable alternative in India. That’s what we’re dedicated to and can stay dedicated to within the foreseeable long-term future.”

Brokerage Macquarie initiated protection of One97 on Thursday with an underperform score and set a goal of Rs 1,200, 44% beneath the IPO value of Rs 2,150. The enterprise mannequin lacks focus and path, it mentioned, whereas calling it a “money guzzler.” Macquarie mentioned reaching scale with profitability is a giant problem and that laws and competitors are added worries.

Different poor debuts following IPOs exceeding Rs 1,000 crore embody Café Espresso Day in November 2018, which dropped 18%, whereas ICICI Securities fell 14% in April 2018.

One97’s opening contrasts with these of different startups.
PB Fintech, mum or dad of digital insurance coverage market Policybazaar, and sweetness ecommerce platform Nykaa’s mum or dad firm FSN E-Commerce Ventures, made their debuts in November, itemizing at premiums to their IPO costs. Nykaa
opened November 10 with a 77.87% premium over the difficulty value.

Analysts who questioned the One97 enterprise mannequin and lack of revenue together with lofty valuations had been anticipating the inventory to record at a reduction of 5-10%.

“Traders with a longer-term view can proceed to carry the inventory, whereas short-term traders could exit the inventory,” mentioned Vikas Jain, analyst, Reliance Securities. “The tepid subscription figures dented morale, and the itemizing too has been on the weaker aspect, which can result in some extra correction within the inventory.”

One97’s Rs 18,300 crore IPO scraped by means of on the ultimate day of bidding on November 10 with the assistance of overseas institutional and home retail traders.

Almost 80% of the bidding got here from overseas institutional traders, whereas 16% got here from native retail traders. HNIs bid for simply 2.5 million shares, 2.77% of the whole demand, whereas company, home institutional bidding was simply half a p.c.

One97’s losses narrowed to Rs1,701 crore in FY21 from Rs 4,230.9 crore in FY19. On the supply value, the difficulty was valued at 21.3 occasions FY21 value to ebook worth and 49.7 occasions FY21 value to gross sales.

Additionally Learn:
Sharma says Paytm’s business model less understood than others after poor market debut

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