What The Paytm Crash Foretells

It had been billed as India’s biggest IPO (initial public offering), but when digital payments firm Paytm’s Rs 18,300 crore share offer closed on November 10, the results were notably underwhelming.

- M.G. Arun

Though the IPO was oversubscribed, demand for Paytm’s shares was only 1.9 times the supply—in contrast, other recent IPOs, such as of fashion retailer Nykaa (oversubscribed 82 times), food delivery aggregator Zomato (38 times) and insurance products aggregator Policybazaar (17 times) saw much greater investor interest.

Worse was in store for the Vijay Shekhar Sharma-promoted firm when Paytm shares were listed on the exchanges. On November 18, the share price of One97 Communications (Paytm’s parent company) sank 27 per cent. The stock had been listed at Rs 1,950—a discount of 9.3 per cent on its offer price of Rs 2,150—and closed at Rs 1,564, leading to a reported loss for investors of about Rs 5,000 crore. The shares continued their fall on Monday, November 22, plunging to Rs 1,360.30. The company’s market cap dropped to Rs 88,184.67 crore, as against market expectations of around Rs 1.4 lakh crore at the time of listing. Though the share price rose 9 per cent in intra-day trading on November 23 to reach Rs 1,480, market watchers weren’t confident that this marked a turnaround.