Paytm makes lacklustre debut at 9pc discount to listing price; Macquarie cuts target price by 40pc, rates 'underperform'

Some investors partly attributed Paytm's listless performance to broader market profit-booking.
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Paytm operator One97 Communications' shares fell 9 percent in its debut on the Indian bourses, listing below their issue price of Rs 2,150, as its operational losses weighed on investors' minds.

It opened on the NSE at Rs 1,950 and the BSE at Rs 1,955. By around 11:18 am, its shares were down as much as 22.5 percent from the issue price.

At the day's low, on BSE until 11.18 am, at Rs 1,586.25 apiece the shares witnessed a decline of over 26.2 percent compared to the issue price of Rs 2,150. Also, compared to the day's high of Rs 1,960.05 till the same time, the decline from issue price stood at 8.7 percent.

Compared to a lot of recent startups that have made their way to the capital markets, Paytm's IPO saw a tepid response from investors. It was subscribed just 1.89 times, versus the likes of Nykaa and Zomato that saw double-digit oversubscription.

Brokerage firm Macquarie Research initiated its research on One97 Communications with 'underperform', and cut its target price 40 percent from its issue price to Rs 1,200 apiece.

"Dabbling in multiple business lines inhibits PayTM from being a category leader in any business except wallets, which are becoming inconsequential with the meteoric rise in UPI payments," Macquarie analysts said in their note.

"Competition and regulation will drive down unit economics and/or growth prospects in the medium term in our view. Unless PayTM lends, it can’t make significant money by merely being a distributor. We, therefore, question its ability to achieve scale with profitability," it added.

Paytm's IPO comprised a fresh issue of equity shares worth Rs 8,300 crore, and an OFS (offer for sale) by existing shareholders such as Ant Financial, Alibaba, Elevation Capital, Saif Partners and founder Vijay Shekhar Sharma worth Rs 10,000 crore.

Some investors partly attributed Paytm's listless performance to broader market profit-booking, especially given the price rallies the market has been seeing lately.

For the startup ecosystem however, Paytm's IPO has been a historical moment that signals the coming of age of innovative tech companies from India. From a small wallet startup in 2009, Paytm today has spread its reach far and wide in the financial services sector - right from digitising small businesses, to helping people invest in capital market instruments.

Paytm has also been responsible for the adoption of technology in the otherwise archaic institutional banking sector in India, and scaped the landscape for more fintech innovation from newer fintech startups.