Paytm stock erodes over half of IPO investors' wealth in less than 2 months

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NEW DELHI: Some bullish brokerage reports, a “stellar” December quarter update, optimistic comments from founder Vijay Shekhar Sharma—it seems nothing can stop the slide in One97 Communication shares. The company owns the

brand.

The counter has fallen for the ninth straight day, dropping over 21 per cent in the process. During the day, Paytm shares hit an all-time low of Rs 1,051, eroding over half of the value from its IPO price of Rs 2,150.

One97 Communications, the largest ever initial public offer (IPO) on Dalal Street, got listed with much fanfare two months back. But the jubilant mood soon turned into gloom as the stock saw the worst debut on bourses in a decade.

The tone was set by a Macquarie report that came hours before the scrip got listed. Macquarie analysts termed the company as a “cash guzzler” and set a price target at Rs 1,200. Not even two months later, it revised the target to Rs 900.

Meanwhile, many analysts are out with bullish target prices as high as Rs 1,875. Bulls include Morgan Stanley, JP Morgan and Goldman Sachs who also managed the issue. Interestingly, even their target prices were far lower than the IPO price they set just a month earlier.

Just ahead of the listing of Paytm on November 18, Madhur Deora, President & Group CFO had said: “We could have priced the IPO higher if we wanted to but we thought that this is the right balance for making sure that the investors who come in the Paytm IPO should be treated very fairly and this is where we were comfortable.”

Nonetheless, the stock continued its slide, taking a few hopeful pauses in between. Now, the stage seems to be set for further slide in the counter.

“Paytm share price may see more downside till Rs 1,000-950 levels in next 2-3 days,” said Ravi Singh, Vice President and Head of ResearchShareIndia. “However, some short covering may be seen at lower levels which may push the stock to consolidation mode. Investors should avoid taking fresh long positions till some positive development in the stock.”

The company has never posted a profit. It has seen a consistent decline in take rate—commission it charges for processing payments—over the years, thanks to the focus on increasing its user base. The company management categorically said it may not be profitable anytime soon.

Nonetheless, nothing has dampened the mood of Paytm CEO. Sharma, in a recent address, said Paytm should be compared to Bajaj Finance and that people are underestimating its payments business.