The shocker of the day is undoubtedly Paytm. The Founder and CEO, Vijay Shekhar Sharma had tears of joy with his company making a stock market debut and on the other hand, traders were crying in pain on this historical debut – never before has the market seen such a poor show put up on day one.
Apart from listing at a discount, the stock ended the day on its 20% LC of the day at Rs.1564 and there are reports being put out there, urging traders to book their losses and get out. Wonder where were they when the IPO was open?
Those on the Street say that the investors were perturbed by its losses – it had a loss of Rs.382 crore in Q1FY22, much higher than the loss of Rs.284 crore in previous Q1. Unimpressed with the financials? Really? Zomato is a company which continues to make losses and it too currently does not seem to have a clear vision ahead. Yet, it had a blockbuster debut and even after its losses for Q2, investors continued to lap up the stock, with many recommending it.
So, how does one loss making company have so much positivity while the other, equally dented on the financials but enjoying a tremendous brand equity goes and makes a historic disaster of itself? Like Zomato, Paytm too is a household name and apparently the retail investors portion saw the best response – the IPO was subscribed 1.89 times, with QIBs portion subscribing 2.79 times, retail investors by 1.66 times and HNIs by just 24%. The HNIs giving this IPO a very tepid response has resulted in this poor listing, clearly showing us who the movers and shakers of the primary market really are.
The Zomato IPO was subscribed 40 times, with QIBs portion subscribing almost 55 times, HNIs by 35 times and retail investors by 8 times. Thus the response of the HNIs and the QIBs does make or break the IPO.
As was explained by our Editor, Mr.SP Tulsian, in the Market Gossip column, explained that media, Investment Bankers and Experts are constantly seen giving a buy call on Zomato and it was sold as a ‘concept’ stock. Isn’t Paytm also a stock in a similar vein? But somehow, its not on their “radar”.
The entire IPO of Paytm itself did not really make much sense. The company in its RHP categorically stated that losses will continue in future “We expect to continue to incur net losses for the foreseeable future and we may not achieve profitability in the future.” It is very unique to see such extreme risk being highlighted in the IPO document: “We cannot assure you that we will ever achieve profitability.”
Our verdict in the IPO Analysis was, “Intense competition leading to market share loss coupled with company’s own ‘guidance’ to continue with losses in the foreseeable future makes this IPO risky and hence we do not recommend it.”
Now post the listing, we do not recommend buying, yet. In the short term one could see some pull back but be assured, every rise, there will be profit booking. You should do the same too. And looking for a long term bet in Paytm? Nah, not a good idea.