Paytm shares rout deals painful reality check for India's ‘casino' IPO markets

Asia's Tech News Daily

India’s, Ant Group, SoftBank, Narendra Modi, WeChat, Amazon, Google, Falguni Nayar, Tesla

India’s booming IPO market has suffered a painful reality check with mobile payments start-up Paytm’s shares tanking in their trading debut.

The rout is seen as scooping some of the froth from India’s frenzied IPO market and prompting investors to look more critically at fundamentals like revenue and profitability in assessing IPO valuations.

“There’s a lesson here: don’t pay attention to the hype,” said Deven Choksey, managing director of brokerage firm KRChoksey Shares and Securities Pvt.

India’s, Ant Group, SoftBank, Narendra Modi, WeChat, Amazon, Google, Falguni Nayar, Tesla

A worker adjusts a hoarding of Paytm in Ahmedabad, India. File photo: Reuters

Paytm, backed by China’s fintech giant Ant Group and Japan’s SoftBank, raised US$2.5 billion in India’s largest-ever public offering that valued the company at roughly US$20 billion. Alibaba owns a stake in Ant and owns the South China Morning Post.

Paytm’s shares tanked because the issue was “horribly priced” for a company “burning cash with declining revenues and no profits in sight, there were a lot of red flags”, said a New Delhi analyst speaking on the basis of anonymity.

In the first two days of trading after the IPO, which hit the bourses on November 18, investors lost US$900 million in what was one of the worst-ever market debuts by a big tech company, wiping out about a third of the start-up’s value. Shares have since recovered a little, climbing as much as 12.7 per cent on Wednesday, but are still down more than 20 per cent from its offer price.

But while foreign investors like BlackRock and Canada Pension Plan Investments subscribed heavily, Indian institutions and the public largely steered clear of the flotation in which Paytm founder Vijay Sharma, Ant and SoftBank trimmed their holdings.

“They managed to scrape through the IPO on the back of foreign investors,” the analyst said. Some analysts speculated 43-year-old Sharma’s desire to stage India’s biggest IPO may have been a factor in its expensive pricing.

Paytm, short for “Pay Through Mobile”, was once king of India’s digital financial payments world. It struck pay dirt when Prime Minister Narendra Modi stunned Indians in 2016 by banning 86 per cent of banknotes in circulation to root out illegal income.

Sharma “nearly danced with joy” when the announcement came, according to Indian businessman Harsh Goenka who was with him. Indians were forced to turn to digital payments due to the cash shortage. Paytm, founded in 2011, “became a megacompany on the back of demonetisation because they were the only game in town,” said a Mumbai fintech strategist who declined to be identified.

India’s, Ant Group, SoftBank, Narendra Modi, WeChat, Amazon, Google, Falguni Nayar, Tesla

Paytm founder and CEO Vijay Shekhar Sharma (right) pictured with friends during the company’s IPO listing ceremony on November 18, 2021. Photo: Reuters

But soon after, the government unveiled a groundbreaking payments system regulated by the central bank that dramatically lowered the barriers to entry for payments app developers.

Paytm’s share in what is the world’s fastest-expanding cashless payments market has since fizzled to 7 per cent, according to payments provider Razorpay, faced by fierce competition from deep-pocketed rivals like GooglePay and PhonePe, provided by Walmart’s Indian e-commerce retailer Flipkart. “Even my gardener won’t take Paytm,” said the Mumbai strategist.

Paytm, which is also backed by Warren Buffett’s Berkshire Hathaway, has countered by trying to be India’s answer to Chinese super-apps like WeChat. It is branching into insurance, fantasy sports, gold trading and mobile gaming, aiming, Sharma says, to be a financial services “superpower”.

But analysts are sceptical Paytm will make much headway in these segments. “Most things Paytm does, every other large ecosystem player like Amazon, Flipkart, Google etc are doing,” research house Macquarie commented.

There is a silver lining to this sobering debut: it could moderate the casino-like feeding frenzy for IPO listings

Anand Mahindra

More than 50 Indian companies have raised a record US$15 billion via IPOs so far in 2015, swept along by the country’s stock market which has been the best performing among large Asian markets.

But analysts have been suggesting for some time that valuations have become seriously overheated. Already, Paytm’s dismal start appears to be having a chilling effect on other tech businesses’ flotation plans. Indian MobiKwik on Tuesday said it would hold its IPO later than it initially planned, without giving any dates. Waiting in the wings to list are SoftBank-backed hotel group Oyo and ride-sharing company Ola, among others.

India’s, Ant Group, SoftBank, Narendra Modi, WeChat, Amazon, Google, Falguni Nayar, Tesla

Indian girls wearing masks depicting Indian Prime Minister Narendra Modi hold new currency notes to support the ban on old high denomination currency notes. Photo: EPA

There is “a silver lining to this sobering debut: it could moderate the casino-like feeding frenzy for IPO listings and help restore the hunt for true value”, tweeted Anand Mahindra, chairman of Indian carmaker Mahindra and Mahindra.

Other Indian internet start-ups whose IPOs have done well, like food-delivery giant Zomato, have fast-growing revenues. Online beauty portal Nykaa which was listed this month not only has strong revenue growth, it also, unusually for a start-up, boasts profits. Nykaa soared 96 per cent on its first trading day, making its founder, ex-banker Falguni Nayar, India’s richest self-made woman.

When demand was so weak for the Paytm issue – it was subscribed just 1.89 times (Nykaa by contrast was subscribed 82 times) – analysts suspected it might mean its shares wouldn’t sparkle.

But they did far worse than expected, losing 41 per cent over two days from their initial price of 2,150 rupees (US$28.90) per share, before rebounding to over 1,700 rupees per share in trade on Wednesday. Macquarie has set a 12-month target of 1,200 rupees per share (44 per cent below the issue price), saying Paytm “has been a cash-burning machine, spinning off several business lines with no visibility on achieving profitability”.

India’s, Ant Group, SoftBank, Narendra Modi, WeChat, Amazon, Google, Falguni Nayar, Tesla

Vijay Sharma. Photo Instagram

Paytm said in its prospectus it expected to “incur losses for the foreseeable future”. One97, Paytm’s parent, posted a US$230 million loss in the last financial year on revenue that fell 10 per cent year-on-year to US$430 million. “We’ve been telling investors that is a significantly high amount of money to be losing,” Choksey said. “They keep going into different businesses using their technology but they need a sustainable model to make money.”

So why did seasoned institutional investors like BlackRock put their money into Paytm? “There is the Fomo [fear of missing out] factor. India is the last bastion of great hopes and fabulous returns in the long term,” said the Delhi analyst.

India’s, Ant Group, SoftBank, Narendra Modi, WeChat, Amazon, Google, Falguni Nayar, Tesla

An ad for Paytm in a Mumbai general store. File photo: Bloomberg

In a bid to repair shattered employee morale after Paytm’s shares plunged, company founder Sharma, whose father was a teacher who scraped to send him to engineering college, compared the firm to Tesla.

The electric vehicle-maker, he reminded employees at a marathon four-hour town hall meeting, had been the world’s most shorted stock for a few years before its market capitalisation ballooned to over US$1.1 trillion.

Using a cricket analogy, Sharma said, “Wickets on the first two balls don’t mean the match is lost.”

Internet Explorer Channel Network
Asia's Tech News Daily
News Related


Exclusive: Intel Reveals Plans for Massive New Ohio Factory, Fighting the Chip Shortage Stateside

As part of an effort to regain its position as a leading maker of semiconductors amidst a global chip shortage, Intel is committing $20 billion to build a manufacturing mega-site ... Read more »

China is set to lead emerging market equities out of the doldrums amid Covid-19 headwinds

Last year was a challenging one for emerging market equities. The MSCI Emerging Markets Index dropped by almost 5 per cent, while its developed market counterpart rallied by more than ... Read more »

Classic movies in SoCal: 'King Kong,' 'Casablanca,' 'Aguirre,' 'El Topo' and more

Find a flick with our weekly curated list of classic movies, cult favorites, film festivals, etc., playing at theaters and pop-ups and/or streaming online. Before you go, remember to call ... Read more »

Alibaba, NetEase drag Hong Kong stocks from two-month high as Nasdaq peers enter market correction phase

Hong Kong stocks dropped from a two-month high, trimming gains for the week, following jitters in global markets after a rout drove a key US technology gauge into a correction ... Read more »

Why Liv @ Mb Is A Good Investment

Source: LIV @ MB Written by: James Carnell Investment in real estate has always been considered extremely lucrative and safe. However, it is not as straightforward as it looks. There ... Read more »

Russia proposes ban on use and mining of cryptocurrencies, points to steps taken in China

Russia’s central bank on Thursday proposed banning the use and mining of cryptocurrencies on Russian territory, citing threats to financial stability, citizens’ well-being and its monetary policy sovereignty. The move ... Read more »

Los autos eléctricos ya superan en ventas a los gasoleros

La movilidad eléctrica continúa haciendo estragos en el mercado automotriz. Esta vez, se trata de lo que parece ser el inicio de una tendencia que no volverá a modificarse: durante ... Read more »

Hua Hin area condo market slow Pandemic brings halt to new project launches but prices hold steady

Some seafront sites are available in Cha-am but it is less popular than Hua Hin which offers greater convenience and more amenities. The condominium market in the Cha-am, Hua Hin ... Read more »

Whitehead, Jeffers among Book Critics Circle nominees

© Provided by Associated Press This combination of book cover images shows “The Love Songs of W.E.B. DuBois” by Honorée Fanonne Jeffers, from left, “Harlem Shuffle” by Colson Whitehead and ... Read more »

La startup de chips cerebrales de Elon Musk se prepara para las primeras pruebas en humanos

Elon Musk parece estar cerca de iniciar los primeros ensayos en humanos de su tecnología de interfaz cerebro-computadora. Una nueva oferta de empleo para “Director de Ensayos Clínicos” en Neuralink ... Read more »

9 Nonperishable Foods to Keep in Case of Emergencies

Disasters can strike without warning, but that doesn’t mean you have to be unprepared—especially when it comes to what’s in your kitchen. Load up on nonperishable food now to be ... Read more »

Shoppers Say This TikTok-Approved Push Broom Is Great for Getting Rid of Pet Hair

Tired of busting out the old vacuum every time you spot some cat or dog hair clumping up on the carpet? You can rake those rolling tumbleweeds away—for a while, ... Read more »

‘True Love’: ‘Ozark’ And ‘The Outsider’ Actor Marc Menchaca Joins Gareth Edwards’ Film For New Regency

EXCLUSIVE: Marc Menchaca (Ozark, The Outsider) is the latest addition to the cast of Gareth Edwards’ New Regency film, True Love, which has entered production in Thailand. He’ll star alongside ... Read more »

Adele postpones Las Vegas residency due to Covid-19

Adele performs on stage in Cologne, Germany.Sascha Steinbach | Getty Images Adele apologized to fans in a teary video on Thursday announcing that she is postponing her anticipated Las Vegas ... Read more »

What Is Jeff Bezos’ Girlfriend Lauren Sanchez’s Net Worth? Here’s How She Makes Her Money

It’s no secret that Amazon founder Jeff Bezos is a billionaire. In fact, Forbes’ 2021 Billionaires List declared the e-commerce entrepreneur the world’s richest person for the fourth year in ... Read more »

Amazon University Esports to expand to UAE, Saudi Arabia with MENATech

© Motivate Publishing Amazon joins forces with MENATECH to expand Amazon UNIVERSITY Esports to KSA and UAE Amazon in Saudi Arabia and the UAE joins forces with MTE (MENATech), a ... Read more »

Jeff Bezos joins tycoons pouring billions in new anti-ageing research

Death is very likely the single best invention of Life,’ Steve Jobs once observed. ‘It is Life’s change agent. It clears out the old to make way for the new.’ ... Read more »

Internet access is key to ending global inequality as the world moves online

We all know too well that the world is not becoming more equal. Inequality between and within nations is rising with historic speed worldwide. The income gap between rich and ... Read more »

French energy giant Total joins push for Myanmar sanctions

The Associated PressFILE – This photo shows TotalEnergies tower in La Defense business district outside Paris on Sept.7, 2021. French energy conglomerate TotalEnergies has asked the American and French governments ... Read more »

Jim Cramer says the stock market is getting closer to forming a bottom

CNBC's Jim Cramer said Thursday he believes the stock market is getting closer to reaching an investable bottom after a challenging start to the new year. The “Mad Money” host's ... Read more »

As We See It review: A slice of life on the spectrum

The word “normal” gets thrown around a lot in As We See It, the new half-hour dramedy on Amazon Prime Video. “What’s the big deal about normal?” asks Douglas (Andrew ... Read more »

Cramer's lightning round: NextEra Energy is a buy

Loading chart… NextEra Energy: “NextEra is the fastest growing utility. I think it's terrific, and I actually would be a buyer here tomorrow morning.” Loading chart… Spero Therapeutics: “This is ... Read more »

This Vitamin C Serum With Thousands of Five-Star Amazon Reviews Is On Sale Right Now

If you’ve been keeping up with beauty trends lately, vitamin C serums have probably come across your radar. That’s because dermatologists unanimously agree vitamin C has a myriad of skin-care ... Read more »

Loads of Galentine’s Day Party Ideas You and the BFFs Will Love

Christmas is great, Halloween is fun, and New Year’s Eve is overrated (I said what I said). But there will never be a celebration quite like a Galentine’s Day party. ... Read more »

This Italian Pharmacy Hidden Gem Is My New Winter Skin Savior

For someone who lives in the hottest, driest apartment in New York and has had perennially parched skin and eczema, finding a good face cream that really moisturizes and repairs ... Read more »

This New São Paulo Hotel Is a Design Marvel

“There is no luxury without art and culture.” So goes the ethos of the new Rosewood hotel in São Paulo, according to Managing Director Edouard Grosmangin. The property hopes to ... Read more »

Amazon Shoppers Say This LED Travel Mirror Makes It So Much Easier to Put on Makeup in Dimly Lit Hotels

© Provided by Travel + Leisure Courtesy of Amazon Everyone who travels knows the lighting in hotel rooms can be very hit or miss. Whether it’s harsh fluorescent light bulbs ... Read more »

Aquarius Personality: Discover Your Astrological Truths

Born between January 20 and February 19, Aquarius natives are very independent and are constantly in search of freedom; so much so that they reject a conventional lifestyle and pursue ... Read more »

The Best Trivia Games for Music Lovers

All products and services featured are independently chosen by editors. However, Billboard may receive a commission on orders placed through its retail links, and the retailer may receive certain auditable ... Read more »

Peloton CEO says company is taking 'significant corrective actions,' puts 2Q revenue in forecasted range

John Foley, co-founder and chief executive officer of Peloton Interactive Inc., stands for a photograph during the company's initial public offering (IPO) in front of the Nasdaq MarketSite in New ... Read more »

TV Academy Reveals 2022 Emmy FYC Plans: Live, In-Person Events Are Back — With Restrictions

January isn’t even over, but believe it or not, it’s time to start thinking about the Emmys again. The TV awards season gets underway today — you read that right, ... Read more »

Jim Cramer says 'all banks are not created equal,' and these are his favorites

CNBC's Jim Cramer on Thursday reviewed the recent slate of major bank earnings and explained why his charitable investment trust is sticking with its ownership of Morgan Stanley and Wells ... Read more »

Ahem, This Viral Amazon Coat is Finally on Sale

Not to state the obvious or anything, but it’s cold. Like, really cold. I mean, the I-don ‘t-want-to-leave-my-apartment-until-April kind of cold. But, since having to brave the winter chill is ... Read more »

Procter & Gamble Says Prices Will Keep Going Up Quarterly sales rise 6%, led by health and cleaning products, with price increases accounting for half of the gain

Procter & Gamble Co. is betting the world's consumers will remain undeterred by higher prices on household staples from Pampers diapers to Gillette razors. The Cincinnati-based consumer-products company said sales ... Read more »

The biggest travel trend of 2022: Go big, spend big

If 2021 was about domestic travel, 2022 may be the year of the “bucket list” trip. This is one of the biggest trends that travel insiders expect this year, despite ... Read more »

Oil mutual funds generated the best returns last year Rising prices of fuel spurred performance

Oil mutual funds posted the highest average return of 65.9% in 2021, spurred by the rise in oil prices based on low supply and higher demand, according to Morningstar Research ... Read more »

New contracts have AGE keen on revenue

Transport service is projected to help AGE earn more revenue this year. SET-listed coal trader Asia Green Energy (AGE) expects to double its logistics revenue in 2022 after being awarded ... Read more »

IEAT slashes expenses to lure investors

The Southern Region Industrial Estate in Songkhla is offering discounted land prices. The Industrial Estate Authority of Thailand (IEAT) is trying to attract more investors to its four industrial estates ... Read more »

Lenovo marks global shift towards solutions, services

Global tech hardware giant Lenovo is transforming its business towards solutions and services to capitalise on the “everything-as-a-service” trend. “Technology and innovation continue to disrupt and reshape the business landscape. ... Read more »

Apec session to focus on carbon credits, tax

The carbon tax and carbon credit markets will be major topics of discussion at the finance ministers' meeting at the Asia-Pacific Economic Cooperation (Apec) summit in Thailand this year, says ... Read more »
On you will find lots of free English exam practice materials to help you improve your English skills: grammar, listening, reading, writing, ielts, toeic