Paytm is world’s worst performing large IPO in a decade

The tech start-up's shares have slumped 75% since its $2.4bn public offering last year

Customers outside a shop in Mumbai displaying QR codes for Paytm. The company's IPO last year was India's biggest. AFP

One 97 Communications, the operator of India’s largest digital payments provider, Paytm, has capped the worst first-year share plunge among large initial public offerings over the past decade — and the pain is worsening.

The company, whose founder compared its challenges with those faced by Tesla shortly after the listing, has seen its stock lose 75 per cent of its market value a year after its $2.4 billion offering, the largest on record at the time in India.

The dive is the steepest first-year slide globally among IPOs that raised at least the same amount since Spanish bank Bankia’s 82 per cent drop in 2012, data compiled by Bloomberg show.

Paytm’s grim first anniversary underscores an erosion of confidence in its ability to become profitable after debuting at a time when India’s IPO market was enamoured with tech start-ups. It is one of several start-ups that listed with valuations seen by many as exaggerated.

The stock’s losses have deepened this week amid concerns over the emergence of a potential competitor owned by India’s biggest conglomerate. Last week, Japan’s SoftBank Group sold shares it held in Paytm as a lock-up period set in the IPO expired, fueling a three-day slide.

November’s 30 per cent slide has taken its decline from the IPO price of 2,150 rupees ($26.27) to 79 per cent.

Tech stocks globally are being sold off as investors shun loss-making companies in a deteriorating macroeconomic environment, JM Financial analysts, led by Sachin Dixit, wrote in a note this week.

“This feedback has been well received by company managements and we are seeing all Indian internet companies not just prioritising profitability but also communicating the path forward explicitly,” they wrote.

Paytm shares were sold at the top of a marketed range after an offering that attracted strong demand from individuals and funds, although they never traded above the listing price. The sale attracted traditional global stock pickers such as BlackRock and the Canada Pension Plan Investment Board.

“In every rally, the market as a whole gets too excited about something,” said Shridatta Bhandwaldar, head of equities at Canara Robeco Asset Management. “In 2006-2008, we got too excited about construction companies and capital goods companies. In 2013-2014, we got too excited about midcaps. In 2017-2019 we got extremely excited about non-banking financial companies and in 2020-2022 people were just too excited about technology.

“Some of these companies have good business models,” he said. “Still, you feel there is not enough margin of safety because these are evolving businesses.”