What made Paytm IPO lead to first day fail?
Noida – The first day of trading for Paytm IPO (initial public offering) witnessed an unexpectedly whooping loss for investors. The largest digital payment platform of India lost over a quarter of its value on the first day of trading – a plunge of 27.4 percent. This made it one of the worst market debuts by a tech major company. The One 97 Communications owned Paytm’s losses even surprised many industry experts who were in fact questioning the company’s evaluation and profitability path. As retail investors sit in huge losses, it has cast a dark shadow on the company’s market faring and set owner Vijay Shekhar Sharma up for tough questions on what went wrong with fundraising of $2.5 billion projected through the IPO.
“The dreams of a young country are with me,” said Vijay Shekhar Sharma, the founder, and chief executive officer of One 97 Communications Ltd., operator of the Paytm service, as he wiped his tears of joy before striking the opening gong at the Bombay Stock Exchange at 10 a.m. local time on Thursday.
But by 11 am, Sharma’s dream of a record-breaking opening day turned into the worst since the dot com bubble. Even Paytm pessimists were taken aback by the 27 percent plunge. But what led to the big loss? Experts say that Sharma’s desperation to make Paytm IPO debut break records set in 2010 by Coal India Ltd backfired. Instead, now Paytm has made itself an example of excessive overreach. The company pushed the price as well as the size of the stock offering to reach a breaking point.
“There has been a euphoria around IPOs in India, supported by the bull-run in stocks, and people got carried away by it,” said Nikhil Kamath, co-founder of Zerodha Broking Ltd., India’s largest brokerage. “For Paytm, the runway for their profitability is too long and doesn’t justify the far-fetched pricing.”
Sharma, however, sees things from a different perspective. He said, “I’ve never felt more excited, optimistic, and enthusiastic about the future,” adding slump is “no indicator of the value of our company”.