HONG KONG – ONE 97 Communications, the operator of India’s largest digital payments provider Paytm, has capped the worst first-year share plunge among large initial public offerings (IPOs) over the past decade – and the pain is worsening.
The company has seen its stock erase 75 per cent of its market value one year after its US$2.4 billion (S$3.3 billion) offering, the largest on record at the time in India. The dive is the steepest first-year slide globally among IPOs that raised at least the same amount since Spain’s Bankia’s 82 per cent drop in 2012, data compiled by Bloomberg shows.
Paytm’s grim first anniversary underscores an erosion of confidence in its ability to become profitable after debuting at a time when India’s IPO market was enamoured with tech start-ups. It is one among a slew of start-ups that listed with valuations seen by many as exaggerated.
The stock’s losses have deepened this week amid concerns over the emergence of a potential competitor, Jio Financial Services, owned by India’s biggest conglomerate Reliance Industries. Last week, Japan’s SoftBank Group sold shares it held in Paytm as a lock-up period set in the IPO expired, fuelling a three-day slide.
November’s 30 per cent slide has taken its decline from the IPO price of 2,150 rupees to 79 per cent.
Tech stocks globally have been sold off as investors shun loss-making firms amid a deteriorating macroeconomic environment, JM Financial analysts wrote in a note this week.
“This feedback has been well received by company managements and we are seeing all Indian Internet companies not just prioritising profitability but also communicating the path forward explicitly,” they wrote.
Paytm shares were sold at the top of a marketed range after an offering that attracted strong demand from individuals and funds, although they never traded above the listing price. The sale attracted traditional global stock pickers such as BlackRock and the Canada Pension Plan Investment Board.
“In every rally, the market as a whole gets too excited about something,” said Mr Shridatta Bhandwaldar, head of equities at Canara Robeco Asset Management.
“In 2006-2008, we got too excited about construction companies and capital goods companies. In 2013-2014, we got too excited about mid-caps. In 2017-2019, we got extremely excited about non-banking financial companies and in 2020-2022, people were just too excited about technology.”
“Some of these companies have good business models,” he said, adding that “still, you feel there is not enough margin of safety because these are evolving businesses.” BLOOMBERG