Paytm shares down 18% on its second trading day after weak debut on bourses

Shares of Paytm, India's largest IPO so far, fell as much as 18.16% or Rs 284.00 to Rs 1280.15 in their second day of trading despite positive Q2 data. This was one of the major factors behind market fall, along with a near 5 per cent correction in market heavyweight Reliance Industries Ltd (RIL). At 1 pm, Paytm shares were trading with over 15% correction. The stock was trading lower by Rs 241.15 (-15.42% or to Rs 1323.00 around the same time on the second day after being listed on the bourses on Thursday.

Share of Paytm has hit a 52-week high of Rs 1,961.05, which is less than its issue price of Rs 2150 per share, on BSE on its debut day. India's largest initial public offer (IPO) so far, Paytm, made a tepid debut and was listed on the BSE at a 9% discount to Rs 1,955 per share against its issue price of Rs 2,150 on Thursday. This was a decline of 9.07% or Rs 195. This was in line with the anticipation of the street.  

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Experts have dubbed higher valuations and cash-burning business model as primary reasons behind the weak listing of Paytm IPO.  

Manoj Dalmia, founder and director, Proficient Equities, had said the company is overvalued at a price/sales value of 26 as compared to global peers at 0.3 -0.5 P/S. Highlighting that Paytm is not a market leader in any business, he said that 75% of promoters of the digital payments brand are from other countries, which are selling stakes by the offer for sale (OFS) worth Rs 10,000 crore, which is more than 50% of IPO value.

Earlier, 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 and 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.  

(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.)