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PayTm IPO the underperforming major IPO in the last 10 years worldwide

One 97 Communications Ltd., the owner of India’s largest digital payments service called Paytm, has seen its worst initial share decline among major IPOs in the last decade and the agony is only getting worse. This happened at the end of the company’s first year of business.

A year after its $2.4 billion bid, India’s largest on record, the company’s share price has lost 75% of its market value. The company’s founder, who equated his roadblocks to those of Tesla Inc. shortly after going public, was quoted as saying.

According to data compiled by Bloomberg (1), the plunge represents the largest first-year fall internationally among initial public offerings (IPOs) that have raked in at least the same amount since the 82 percent collapse of Spain’s Bankia SA in 2012.

After debuting when India’s IPO market was enamored with internet companies, Paytm has had a difficult first anniversary, which highlighted the loss of confidence in the company’s ability to thrive. It’s one of many startups listed with values ​​that many people think are too high.

The company’s stock fell this week in response to mounting fears over the possible entry of a new competitor owned by India’s largest conglomerate. As a lock-up period set in the IPO expired last week, Japan’s SoftBank Group Corp. a portion of its stake in Paytm, contributing to a three-day decline.

The drop in initial public offering price (IPO) from Rs. 2,150 which took place in November and was 30% is now 79%.

Chart of Paytm price. Source: Trade View

Investors are avoiding companies losing money on the deteriorating macroeconomic picture, which has led to a global sell-off in technology stocks. Analysts from JM Financial Ltd. led by Sachin Dixit reported their findings in a report this week.

“This contribution was warmly welcomed by company management and we see that all Indian online companies are not only prioritizing profitability but are also openly communicating the way forward,” they said. “We see that all Indian internet companies prioritize profitability.”

Following an offering that drew a lot of interest from both individuals and investors, Paytm shares were sold at the highest possible price in the trading range; However, they were never traded at a price higher than the list price. Major global stock selectors such as BlackRock Inc. and the Canada Pension Plan Investment Board expressed interest in buying shares during the sale.

Shridatta Bhandwaldar, in charge of equity investments at Canara Robeco Asset Management, explained this

“With every surge, the market as a whole gets too excited about something. From 2006 to 2008 we got too enthusiastic about the construction and capital goods industry. In 2013-2014, we showed an over-enthusiasm for mid-caps. We were quite excited about financial companies outside of the banking sector. Between 2020 and 2022, people were way too enthusiastic about technology.” “Some of these companies have good business models,” he said, adding, “but you feel like there’s not enough safety margin because these businesses are change. Some of these companies have solid business models,” he said.

The first launch of the Paytm IPO

In India’s largest-ever first share sale since Coal India’s in 2010, Paytm announced its initial public offering (IPO) for subscription in November 2021. (2)

Anchor investors contributed US$2.46 billion (Rs 18,300 crore) to the initial public offering (IPO). These investors included BlackRock, the largest asset manager in the world; the Canada Pension Plan Investment Board; and the sovereign wealth funds of Singapore and Abu Dhabi. Anchor investors contributed about half of the company’s total funding.

It has been one of the most successfully funded companies in India, receiving funding from well-known investors such as Warren Buffett, Masayoshi Son, and Alibaba. Since then, experienced and novice investors have been watching the company since its IPO.

However, when it officially launched, the company had one of its worst major IPOs, with its shares plummeting more than 27 percent (3). As the price continued to fall, it only stalled as Paytm shares neared levels that would cause a circuit breaker to activate on Indian stock exchanges.

Many market participants took Paytm’s demise as an indication that investment groups had grown dissatisfied with the company’s high prices.

The magnitude of Paytm’s price drop shocked several other shareholders and managed to remove more than $5 billion from the company’s IPO valuation. However, some shareholders have questioned Paytm’s earnings tightness and its lofty valuation of about 27 times gross profit.

Vijay Shekhar Sharma serves as the company’s founder and chief executive officer.

The enterprise earns its income the following sources of income:

Payment Services:

Paytm customers are subject to transaction fees, also known as merchant fees, which are calculated as a percentage of gross merchandise volume (GMV). Additionally, it generates revenue from consumer, convenience, and subscription fees.

Financial Services:

It charges a price for its services, the amount of which depends on the needs of the customer. It also receives an insurance policy commission and fee from the lending company and charges credit card marketing and distribution fees.

Trading services:

For tickets for entertainment, travel and other such services, it charges customers convenience fees and receives transaction fees from the companies that sell the tickets.

Provided by the cloud:

A subscription fee is required to use the Paytm platform and this price can be either fixed or variable depending on the volume of transactions processed through the platform.

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