New Delhi, Nov 24, 2022: One 97 Communications Ltd., the operator of India’s largest digital-payments provider known as Paytm, has bore the worst first-year share plunge among large IPOs over the past decade.
The company, whose founder drew comparison with Tesla Inc. pertaining to the challenges it faced, witnessed its stock erase 75 per cent of its market value one year after its $2.4 billion offering, the largest on record at the time in our country.
Paytm’s disappointing first anniversary accentuates an erosion of confidence in its potential to become profitable after debuting at a time when India’s IPO market was enraptured by tech startups. It’s one among a slew of startups which listed with valuations that were observed by many as to be exaggerated in nature.
Last week, Japan’s SoftBank Group Corp. sold shares it held in Paytm as a lock-up period set in the IPO expired, resulting in a three-day slide.
Tech stocks have been sold off across the globe as investors shun loss-making firms in the middle of a degrading macroeconomic environment, JM Financial Ltd. analysts led by Sachin Dixit stated in a note this week.
“This feedback has been well received by company managements and we are seeing all Indian internet companies not just prioritizing profitability but also communicating the path forward explicitly,” they wrote.
“In every rally, the market as a whole gets too excited about something,” expressed 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,” he said.
“Some of these companies have good business models,” he noted, further adding that “still, you feel there is not enough margin of safety because these are evolving businesses.”
