Paytm IPO subscribed 48% on second day of bidding, know what analyst suggests

The biggest initial public offer in a decade of One-97 Communications-backed digital payments company Paytm was subscribed 48 per cent on the second day of bidding till 5:00 pm on Tuesday. 

The three-day initial share sale was launched on November 8 and will close on November 10, 2021. Paytm IPO is the biggest-ever IPO in a decade after Coal India initial share sale that was launched in 2010 to raise over Rs 15000 crore.

The Rs 18,300-crore IPO has received bids for 2.34 crore equity shares against an offer size of 4.83 crore shares. The quota set aside for retail investors has been subscribed 1.23 times on second day. 

The qualified institutional buyers' portion was subscribed 0.46 times, while non-institutional investors continue to be mute with a mere 5 per cent subscription on the day-two of offer. 

The IPO comprises of offer for sale (OFS) of Rs 10,000 crore from existing shareholders and fresh issuance of equity shares worth Rs 8,300 crore.

Paytm founder, managing director, and chief executive Vijay Shekhar Sharma and Alibaba group firms will dilute some of their stake in the proposed offer-for-sale. 

The company has a price band of Rs 2,080-2,150 per share, implying a valuation of around Rs 1.48 lakh crore and has raised Rs 8,235 crore from anchor investors on November 3, 2021.

Arijit Malakar, Research Head Ashika Stock Broking Ltd says, “Paytm IPO is coming at a time when digital payments in the country have seen exponential growth. While Paytm has a high market share in wallet transactions, and in UPI is low at around 12 per cent, as per market data for July 2021.” 

“Paytm is still in a cash-burning business model and Internet/digital startups are not about profit or revenue. And, it is backed by marquee investors like Ant Financials and Softbank”, he adds.

The analyst suggests the Paytm business model is a high-risk model, and investors who are wanting to bet on listing gains can subscribe to it and the rest can avoid the issue due to high valuation and high business risk.