The digital payments company Paytm's parent company One97 Communications is set to debut on the exchanges tomorrow (November 18,2021). Nevertheless, the largest-ever Rs. 18300 crore IPO issue as against high expectations garnered lukewarm response and was subscribed 1.89 times during the issue offer period between November 8-10 largely because of lower than expected participation of the QIB and HNI categories.
Talking about the subscription break up, the quota reserved for QIBs or qualified institutional buyers was subscribed 2.79 times and that of non-institutional investors (NIIs) saw 24 percent subscription. Retain investors' quota on the other hand was subscribed 1.66 times.
Experts see muted listing for the Paytm IPO
Given the declining grey market premium just ahead of the listing, tepid response to the issue, high valuations, experts foresee the digital payments company to make a weak debut even as the company enjoys high brand positioning and robust service network.
Founder and fund manager at portfolio management services provider Piper Serica Advisors- Abhay Agarwal anticipates weak listing for the Paytm issue. "I will not be surprised to see the stock trade below the issue price and stay there in the foreseeable future", he said.
"While the company has a well-known brand name and its service is omnipresent, the IPO is quite aggressively priced, not leaving much on the table for investors. Unlike Zomato and Nykaa, Paytm is in a very competitive space which will reduce its ability to grow profitably for quite a long time. The IPO saw poor response from HNIs and we do not expect any aggressive buying to emerge even at a lower price", he mentioned.
Before the listing, the Paytm IPO sees a grey market of premium of just between Rs. 20-30 in comparison to Rs. 125-150 hit before the IPO subscription opened. As per IPO Central, the company's shares in the grey market traded at Rs. 2170-2180 per piece as against the final issue price of Rs. 2150 apiece.
CapitalVia Global Research's head of research-Gaurav Garg says that there is a high probability that the stock might list at discount. "The business model looks stable and promising. However, falling grey market premium from Rs 125 per share to Rs 30 per share indicates that there is going to be a muted listing. The company has not made profits so far and I believe that it will take some time for it to actually get there. It is to be seen as to how the company cross-sells other product offerings to its large consumer base (including merchants)," he adds.
It is the country's top digital ecosystem providing a host of services including payment services, commerce and cloud services, and financial services. The company tops as the leading payments gateway based on the number of users, merchants as well as transactions, and also in respect of revenue as of the financial year end March 2021.