Paytm makes tepid listing; what should investors do now? Know what experts have to say

Shares of One 97 Communications Ltd1 (Paytm) made a 'tepid' listing as anticipated by the analysts and Zee Business Managing Editor Anil Singhvi. Stocks of India's biggest initial public offer (IPO) ever, Paytm was listed on the Bombay Stock Exchange (BSE) at 9% discount on Thursday. Paytm stocks opened at Rs 1,955 per share against its issue price of Rs 2,150 on BSE on Thursday. This was decline of 9.07% or Rs 195.  

Largely analysts and brokerages have predicted a weak debut for Paytm, citing it a cash-burning business model and stating that Internet/digital startups are not about profit or revenue. They have also highlighted how it is a loss-making company currently with a loss of Rs 4,230.9 crore in FY19, which was reduced to Rs 1,701 crore in FY21. 

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Macquarie downgrades rating, revises target

On the day of the listing, global financial services group Macquarie has downgraded its rating to 'underperform' and gave a target price of RS 1,200. "Paytm’s business model lacks focus & direction. Achieving scale with profitability is a big challenge.  The company is a cash guzzler. Besides, regulations and competition are added worries for this firm," Macquarie said in its report.  

Divam Sharma, Co-founder of Green Portfolio 

Divam Sharma, Co-founder of Green Portfolio, SEBI-registered Portfolio Management Services, had also expected a flattish to 10% listing gains for Paytm. 

"Investors, who got allotment, should be looking at Paytm as a long-term allocation. This is a high growth story, which still has miles to go. Their leadership in payments and diversification towards ecommerce, cloud services and financial services should ensure high growth for the company in the coming years. That said, support from the capital raised in this IPO, and from large institutional capital, including global pension funds and government funds, will ensure adequate growth support for the company in the coming years," highlighted Divam Sharma. 

Santosh Meena, Head of Research, Swastika Investmart Ltd 

Santosh Meena, Head of Research, Swastika Investmart Ltd, the biggest IPO in India so far debuted the secondary market on a weaker note as compared to our expectations of a flat listing. 

"The company has a huge customer base with strong brand positioning and it has an early mover advantage in digital payment services, however, it is still a loss-making company and very aggressively priced. Therefore, we saw a tepid response in terms of subscriptions," he said.

The analyst said It is difficult to value such companies for time being, but by the time market will understand the way to value such kinds of businesses where the market will focus on how fast it will become profitable and how well it will use its strength to explore new businesses like Credit card and Payment banking, I would suggest only aggressive investors hold this stock for the long term amid uncertainty. 

"Bajaj Finserv is a much better option to play on Fintech businesses because of its proven track record with great comfort of valuations compared to Paytm. Those who played for listing gain should keep a stop loss below Rs 1,720," he added.

Parth Nyati, Founder, Tradingo 

Aggressive investors who got the allotment can hold the stock with a long-term view, said Parth Nyati, Founder, Tradingo.   

"However, the investors who applied for listing gain can exit on the bounce back. New investors are advised to look for other opportunities, where other new edge companies can perform much better than Paytm. We feel due to the brand, the company sought high valuation and it might see a correction in the near term," he said.  

Dr. Ravi Singh, Head of Research & Vice President, ShareIndia

After looking at the overall valuations and earlier losses of Paytm, We advice the investors to book their positions and wait for Rs 1700-1600 levels for fresh investment. Retail investors may remain cautious as the overall market is in profit booking zone pushing maximum stocks in downside territory. Paytm’s future growth is a key to watch for long term investors, he said.

Anil Singhvi, Zee Business Managing Editor 

Earlier, Zee Business Managing Editor Anil Singhvi on Thursday said that that Paytm stocks are likely to be listed below issue price of Rs 2,150. "Long-term investors can buy if the shares fall between 8-15%," said Singhvi.  

(Disclaimer: The views/suggestions/advices expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)