The preliminary public providing (IPO) of One97 Communications, Paytm’s father or mother agency, was one of the crucial awaited public choices of 2021. There was an enormous sense of pleasure surrounding the Rs 18,300 crore IPO, the most important within the historical past of Indian capital markets, even earlier than it had opened for subscription.
A number of causes led to the thrill across the IPO, together with the extended bullishness on Dalal Road, the IPO rush, and the success of different new-age tech corporations like Zomato and Nykaa.
Retail traders had anticipated Paytm to ship sturdy outcomes, based mostly on the result of different new-age tech corporations that went public earlier. Because of this numerous retail traders have been shocked when Paytm shares got here crashing down on the day it made its debut on the inventory exchanges.
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After crashing practically 28 per cent after getting listed final week, Paytm ended over 12 per cent decrease on Monday. The consequence was an enormous erosion of traders’ wealth and market capitalisation (m-cap). Even after recovering practically 10 per cent on Tuesday, Paytm’s m-cap stays under Rs 1 lakh crore.
Whereas Paytm shares rose 10 per cent in the present day, it’s more likely to witness volatility over the short-term, given its disastrous inventory market debut. It is because many brokerages have questioned Paytm’s inventory valuation, even at present ranges. At Tuesday’s closing, Paytm shares have been buying and selling at Rs 1,494.95 on the Bombay Inventory Change (BSE).
WILL PAYTM’S WEAK DEBUT DAMPEN IPO CRAZE?
Many consultants consider that Paytm’s poor itemizing on the inventory market will pose a threat for future IPOs of new-age tech startups. It would additionally dent the general craze for IPOs amongst retail traders.
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Gopal Agrawal, managing director and co-head of funding banking at Edelweiss Monetary Companies Restricted, advised Bloomberg that the weak itemizing will “nudge individuals to be cautious” and never take the “market with no consideration by blindly putting bets”.
“It will be significant that an organization’s story and prospects are nicely understood by traders,” he added.
One of many explanation why extra retail traders have positioned bets on IPOs this 12 months is because of the bullish inventory market momentum, aided by the Reserve Financial institution of India’s low curiosity regime.
One more reason is the frenzy of retail traders who began investing within the inventory markets for larger returns. All these elements resulted in a spectacular inventory market rally, creating a great atmosphere for a number of new-age tech startups to go public.
Nonetheless, many analysts now really feel that Paytm’s market debacle will pressure tech startups planning to go public to rethink their technique, as traders might train higher warning.
Earlier within the day, funds agency MobiKwik introduced that it might perform an IPO later than deliberate initially. The announcement was made by the agency’s CEO Bipin Preet Singh only a few days after Paytm’s dismal debut.
“We did wish to have it (the IPO) round November,” founder and CEO Bipin Preet Singh advised information company Reuters. “We have now a one-year window, from October, to record and clearly we’ll do it once we really feel that we’re going to have a profitable IPO.”
A number of different new-age tech startups planning to go public might evaluation their technique and delay their public providing within the aftermath of Paytm’s weak itemizing.
OVERVALUED IPOs MAY NOT SUCCEED
A number of firms have gone public this 12 months and have raised greater than $15 billion by way of IPOs, marking an annual report by way of complete proceeds raised.
Nonetheless, there was loads of criticism concerning excessive IPO value valuations at which these corporations raised cash. Paytm additionally confronted flak over its excessive valuation, extra so as a result of profitability stays a significant concern for the main digital funds agency.
Following Paytm’s weak itemizing, analysts consider traders shall be extra cautious about upcoming IPOs and weigh dangers earlier than putting bids. This might have a dampening impression on firms that count on to go public, particularly massive ones with costly valuations.
Defined: How Paytm’s weak inventory market debut impacted traders