One 97 Communications Ltd., the operator of Paytm, India’s largest digital payments provider, posted its worst first-year share price drop among major IPOs in the past decade, and it’s getting worse.
The company’s founders compared the challenges it faced to Tesla’s shortly after listing, whose shares lost 75 percent of their value a year after its $2.4 billion offering, the largest ever in India at the time. issue.
Global IPOs raising at least the same size had their worst first-year declines since Spain’s Bankia SA fell 82 percent in 2012, according to data compiled by Bloomberg.
Confidence in Paytm’s profitability has eroded after it made its debut amid a lucrative Indian IPO market for tech start-ups. It’s one of many startups whose valuations are inflated by many.
The stock’s losses were exacerbated this week by concerns over the emergence of a potential rival owned by India’s largest conglomerate.
Last week, Japan’s SoftBank Group Corp sold its stake in Paytm as a lock-up period set in the IPO expired, triggering a three-day slide.
The 30 percent drop in November brought it down 79 percent from its IPO price of Rs 2,150.
Global technology stocks sold off as investors shunned loss-making companies amid a deteriorating macroeconomic environment, JM Financial Ltd. analysts led by Sachin Dixit wrote in a note this week.
“This feedback has been well-received by company management, and we see all Indian Internet companies not only prioritizing profitability but also clearly communicating the way forward,” they wrote.
Shares of Paytm sold at the top of the market range after attracting strong demand from individuals and funds, although they never traded above their listing price.
The sale has attracted traditional global stock-picking firms such as BlackRock & Co and the Canada Pension Plan Investment Board.
“In every rally, the whole market 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 mid-caps. In 2017-2019 we got too excited about non-bank financial companies and in 2020 -In 2022, people are getting too excited about technology.”
“Some of these companies have good business models,” he said, adding, “but you still don’t feel like there’s enough margin of safety because these are growing businesses.”
(Aside from the title, this story is unedited by NDTV staff and published via a syndicated feed.)
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