Paytm IPO’s Mega Disaster: Rs 50,000 Crore Market Capital Wiped Off In 3 Days

They labeled it a “cash guzzler” with its key obstacle being achieving scale with profitability.

Paytm’s market value tanked by Rs 56,233 crore after its abysmal showing at its IPO on November 18.


Performance Compared To Other IPOs

Its shares have crashed as much as 40% from its IPO price to hit a low of Rs 1,283 in just two trading sessions.

According to analysts, this downward spiral can be attributed to overly high valuations.

Compared to companies with stellar IPOs where Nykaa’s issue was subscribed 82 times and Zomato’s 38.25 times, Paytm was slowly subscribed only 1.89 times.

Exorbitant Valuations Its Downfall

Paytm’s parent company, One 97 Communications Ltd., raised a record IPO sum of Rs 18,300 crore.

However, its unimpressive trading debut led to widespread criticism pouring in that the company and its investment bankers had pushed too hard in the offering.

Founder and Chief Executive Officer Vijay Shekhar Sharma himself had spoken about his ambitions to surpass the long-standing IPO record set by Coal India in 2010.

CEO Net Worth Now Less Than $1 Bn

Sharma’s net worth saw an erosion from $2.5 billion IPO value to less than $781 million as of Monday morning.

He holds 9.1% stake in the company equivalent to nearly 6 crore equity shares and 2.1 crore options.

What Went Wrong?

Macquarie Research analysts said that the company’s business model “lacked focus and direction” and gave it an underperform rating.

They labeled it a “cash guzzler” with its key obstacle being achieving scale with profitability.

The only way it can make significant money is by beginning a lending business since its role as a distributor is not reaping enough rewards.

What It Means For Future IPOs

Paytm’s achievement or lack thereof has bleak implications for India’s stock-market boom which was ranked among the world’s most frenzied.

Paytm’s IPO in particular was upheld as a reflection on the country’s growing appeal against China as a destination for global capital.

Investors will now be more cautious and defensive against risk especially for loss-making new-age technology companies, says Amit Pamnani at Swastika Investmart.

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