Paytm’s shares rushed as much as lower 25 percent in a weak stock market debut on Thursday, a week after the country’s biggest-ever initial public offering. The stock began trading at ₹ 1,950 on the NSE, indicating a decline of 9.3 percent or ₹ 200 from its issue price of ₹ 2,150. Paytm shares extended losses after inaugurating as the stock dropped as much as 25 percent from the issue price to hit an intraday low of ₹ 1,586.
If it were to drop as far as Rs 1,560, it would hit the exchange’s 20% circuit breaker, at which point trading would be suspended for the day.
“Paytm has been loss-making, and there is no sign to turn profitable in the near future,” said Parth Nyati, founder of Indian trading platform Tradingo.
Paytm, which also includes SoftBank among its funders, raised $2.5 billion in its initial public offering, of which $1.1 billion was from institutional investors. Last week it received $2.64 billion worth of bids for the outstanding shares on offer, or 1.89 times.
Analysts at Macquarie Research stated in a note to clients that Paytm’s business model lacked “focus and direction” and started coverage with an underperform rating. “Achieving scale with profitability a big challenge,” the note said, calling the company a “cash guzzler.”
Many market participants viewed the stock’s crash on its debut as a sign that financers had become disillusioned with a fresh string of IPOs with inflated valuations.
Paytm’s listing could cause “an end to obnoxious pricing in IPO markets,” Mumbai-based investment advisor Sandip Sabharwal said, adding that too many of the companies did not have a definite path to profitability.
Engineering graduate Vijay Shekhar Sharma established Paytm in 2010 as a platform for mobile recharges. The company overgrew after ride-hailing brand Uber listed it as a quick payment option in India, and its use enlarged further in late 2016 when India’s ban on high-value currency notes encouraged digital payments.
Paytm’s victory has turned Sharma, a school teacher’s son, into a billionaire with a net worth of $2.4 billion according to Forbes. Its IPO has also minted hundreds of new millionaires in a country where per capita income is lesser $2,000.