Key Sentence:
- Shares of Indian digital payments platform Paytm fell more than 20% on its debut on the Mumbai Stock Exchange.
- The company raised $2.5 billion in the nation’s most extensive initial public offering (IPO).
Several investors have expressed concern about Paytm’s missing business model. The company’s most prominent backers include Chinese payments giant Ant and Japanese technology group SoftBank.
Paytm’s first-day drop came as Asia’s third-largest economy went public as the stock neared a record high. India’s benchmark BSE Sensex index has risen nearly 25% since the start of the year. Indian startups have attracted billions dollars in funding as investors seek opportunities in the Covid-stricken economy.
Even before Paytm hit record shares, the Indian company had raised a record $10.5 billion this year through an IPO in 2021. Last week, beauty retailer Nykaa rose on its debut. While grocery delivery app Zomato rose on its first trading day in July. Rising Indian IPO forecasts have prompted authorities to take steps to cool the market.
On Tuesday, the country’s market regulator outlined plans to tighten rules on spending the money they raise on IPOs. This comes after the Central Bank of India’s decision to impose restrictions on how much people can borrow to buy shares of new subscriptions.
Vijay Shekhar Sharma, once India’s youngest billionaire, the Paytm platform was launched in 2010. The company is quickly becoming synonymous with digital transactions in a country traditionally dominated by cash pay.
Paytm received a significant boost from PM Narendra Modi’s government’s efforts to limit cash use. Including demonstrating nearly all banknotes in circulation five years ago.
This is also beneficial because people are less likely to use physical money during a pandemic.
Nearly 22 million shop owners, shop owners, taxi and rickshaw drivers. And other providers in India accept payments with blue and white stickers with QR codes on the platform.
Last year, the company processed more than $54 billion in transactions for its 337 million customers. Paytm’s weak debut wasn’t entirely unexpected, as it took institutional investors three full days to bid enough to cover all the shares on offer – although the drop took many by surprise.
Three main factors worry analysts about the company’s future: a long and fuzzy road to profitability. Extremely high ratings, and intense competition in the payments market from Google, WhatsApp, and Walmart-powered phones.
There are also concerns that Paytm has stuck its finger in too many companies and is out of focus. Hindering its ability to become a leader in any of these areas. Global brokerage firm Macquarie, which started backing the stock today, rated Paytm. As a “low performer” and said it saw the potential for Paytm to fall more than 40% from its issue price.
Paytm’s poor debut performance stands in stark contrast to the 80 percent growth seen by another major Indian internet unicorn, beauty retailer Nykaa, on registration day.