(Bloomberg) — Shares of Indian digital payments giant Paytm closed at the lowest since their market debut last month following the nation’s biggest-ever initial public offering, as investors remain concerned about the startup’s path to profitability.
The stock dropped 5.6% to 1,321 rupees in Mumbai, extending this week’s losses to almost 16%. It slid about 8% on Wednesday after a post-listing lockup on sales of shares allotted to anchor investors expired.
One 97 Communications Ltd., Paytm’s parent company, raised $2.5 billion in its IPO but a 27% plunge in its Nov. 18 debut made it one of the worst initial showings by a major technology firm since the dot-com bubble era of the late 1990s. The stock is now down nearly 39% from its issue price of 2,150 rupees.
“Paytm shares will continue to be under pressure as there is clearly no follow-up buying by large institutional investors even at this price,” said Abhay Agarwal, fund manager at Mumbai-based Piper Serica Advisors Pvt. “Main reason for this is the company’s inability to coherently articulate a path to profitability.”
One 97 reported its first financial results as a public company at the end of November, with losses widening to 4.74 billion rupees ($62 million) in the July-to-September quarter from a year ago amid rising expenses. Dolat Capital Market Pvt., a local brokerage that this month rated Paytm a buy and set a target price of 2,500 rupees, said it expects the company to turn profitable by March 2026.
JM Financial Institutional Securities Ltd. has a sell rating on the stock while Macquarie Capital Securities has rated it as underperform.
Seeking Safety
This week’s losses for Paytm have come amid a broader market selloff on concerns over the Federal Reserve’s plan to tighten monetary policy and potential economic risks from the spread of the omicron virus variant. India’s benchmark S&P BSE Sensex Index lost 3% this week.
“In a market that is already under pressure, investors are scurrying for safety and away from loss-making companies like Paytm,” Agarwal said.
India’s IPO market — where companies have raised a record near $17 billion this year — has witnessed some investor caution since the disappointing debut for Paytm, whose offering had global institutions such as BlackRock Inc., Morgan Stanley Asia and Goldman Sachs as anchor investors. Several of these big investors were said to have added to their stakes last month after the stock’s losses touched as much as 41%.
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