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India’s Paytm tumbles 26 per cent on listing day

The Indian stock market investors received a big jolt when One 97 Communications, the operator of the country’s leading digital payments platform Paytm, tumbled 26.2 per cent on its listing day. The stock hit a low of Rs 1,586 in a market where the bears had a field day Thursday. Market analysts pointed out that Paytm, despite having a strong market value, erred with its high valuation. It received a muted response from retail investors when the company announced its subscription of shares. The share at Rs 1,955, down 9.1 per cent from the issue price of Rs 2,150 and hit the day’s low of Rs 1,586.25 on the BSE. It was trading at Rs 1,676.10, down by Rs 473.90 or 22.04 per cent, at 13:00 hours IST.

Mute response

The company provides payment services, commerce and cloud services, and financial services to 33.7 crore consumers and over 2.18 crore merchants, as of June 2021. The public issue received a subscription of only 1.89 times with the retail portion subscription at 1.66 times only. Another factor that weighed against the company was the huge losses it accumulated from the business so far. Those who have expected a listing gain suffered the most. Paytm posted a consolidated loss of Rs 1,701 crore for the financial year FY21, as against a loss of Rs 2,942.4 crore in FY20. It reported a loss of Rs 4,230.9 crore in FY19. It reported a total income of Rs 3,186.8 crore in FY21 when compared with Rs 3,540.7 crore in FY20 and Rs 3,579.7 crore in FY19. The loss encountered by Paytm on its listing day might affect the way investors approach future IPOs from companies that reported losses in their businesses. It’s also important for companies to look at a reasonable valuation while announcing the price.

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