(Bloomberg) — Paytm’s $2.5 billion initial public offering was fully subscribed on the last day of India’s biggest share sale, following a relatively slow start as analysts raised concerns about the firm’s profitability.
The digital payments provider received bids for 1.9 times the number of shares on offer as of 5 p.m. in Mumbai, according to data on the stock exchange’s website. While the portion set aside for retail investors was oversubscribed 1.7 times, that for institutional buyers received demand for 2.8 times the shares on sale. Non-institutional investors such as wealthy individuals and companies purchased about 24% of the shares offered to them.
The performance pales in comparison with recent IPOs such as those of beauty startup Nykaa or food-delivery platform Zomato — which were fully sold on Day 1 — and contrasts with strong demand from Paytm’s anchor investors whose allocation was oversubscribed more than 10 times last week. A key focus is when Ant Group-backed Paytm will turn profitable enough to justify a share price of as much as 2,150 rupees ($29) that the company is seeking.
“These are very high risk bets,” Rakhi Prasad, an investment manager at Alder Capital in Mumbai, said in an interview to Bloomberg TV Tuesday. The company has the strength of being the largest digital payments network from a merchant’s perspective but has “a long runway” to capitalize on that and generate some profits, she added.
India’s Largest-Ever IPO a ‘High-Risk Bet,’ Says Fund Manager
Nykaa’s shares soared some 96.1% on debut Wednesday, while Zomato has gained about 79% since it listed in July. A blistering rally in India’s stock markets has encouraged a crop of IPOs this year and more could come if predictions such as Mark Mobius’s call of a 50-year rally in Indian equities hold true.
Paytm had reported a 10% drop in revenue during the year ended March 2021, after intensifying competition from Walmart Inc.’s Flipkart and Amazon.com Inc. cut its e-commerce and cloud sales by the same amount. Even though the company has slashed marketing costs and is freeing up cash, it continues to post losses, Reliance Securities Ltd. analyst Vikas Jain wrote in a note dated Nov. 6.
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