MUMBAI (BLOOMBERG) - India's largest digital payments provider lost more than a quarter of its value in its first day of trading, heading for one of the worst-ever debuts by a major technology company and casting a chill over a stock-market boom that had ranked among the world's most frenzied.
The 26 per cent plunge in One 97 Communications, operator of Paytm, surprised even some skeptics who had questioned the company's valuation and path to profitability. Retail investors who piled into the offering are now sitting on heavy losses, alongside global money managers including BlackRock and the Canada Pension Plan Investment Board.
India's biggest-ever IPO had been touted by some as a symbol of the country's growing appeal as a destination for global capital, particularly for technology investors looking for alternatives to China. The question now looming over the US$3.5 trillion (S$4.75 trillion) stock market is whether the optimism that drove IPO fundraising and the benchmark S&P BSE Sensex to record highs has gone too far.
"This kind of a plunge, frankly, has come as a surprise considering the euphoria surrounding the primary market," said Yasha Shah, head of equity research at Samco Securities.
Paytm shares fell as low as 1,586.25 rupees, before paring losses to 1,665 rupees as of 12.18pm in Mumbai. That compared with the IPO price of 2,150 rupees, the top end of the marketed range. The Sensex dropped 1 per cent, among the largest declines in Asia.
Paytm raised about US$2.5 billion in the IPO, with individual investors bidding for nearly twice the number of shares that were available.
In an interview with Bloomberg News minutes after shares sank at the open, Paytm founder and chief executive officer Vijay Shekhar Sharma said the slump "is no indicator of the value of our company."
"We are in it for the long haul," he said. "We'll put our heads down and execute."
Mr Sharma founded Paytm two decades ago and pioneered digital payments in a predominantly cash-transacting country of 1.3 billion people. The name, short for Pay Through Mobile, rhymes with ATM.
Ahead of the listing, Macquarie Capital Securities (India) initiated coverage on the company with an underperform rating and a price target of 1,200 rupees, implying an over 40 per cent downside from the issue price.
"We believe Paytm's business model lacks focus and direction," analysts Suresh Ganapathy and Param Subramanian wrote in the report. "Unless Paytm lends, it can't make significant money by merely being a distributor. We therefore question its ability to achieve scale with profitability."
The market debut of Paytm, backed by Berkshire Hathaway., SoftBank Group and Ant Group, comes in a standout year for India's internet start-ups.
The number of so-called unicorns in the country has doubled and public markets have witnessed strong listing performances of several, including food-delivery service Zomato, beauty retailer Nykaa's parent FSN E-Commerce Ventures and PB Fintech, operator of online insurance marketplace Policybazaar.
IPOs in India have raised about US$15 billion so far this year, already an annual record by total proceeds. Companies that started trading in 2021 rose by an average of 23 per cent in their first session, according to data compiled by Bloomberg as of Nov 15.
