Paytm Shares Sink 75% Since IPO, Biggest Global Slide In A Decade

Fintech major Paytm has lost more than 75% of its market value since listing, the world’s biggest single-year tumble in share prices among large initial public offerings (IPOs) in the past decade.

From selling at INR 1,796.55 apiece on the bourses on November 25 last year, the Paytm stock traded as low as INR 441.05 on November 24, 2022. In between, the fintech giant has wiped off nearly three-fourths of investor wealth. 

Another data point that has caught the attention of critics appears to be its market capitalisation which has been on a downward spiral for the past many months. From clinching an INR 1 Lakh Cr market capitalisation in November last year, the fintech giant’s current value stands at INR 28,631.01 Cr.

Data accessed by Bloomberg shows that this was the steepest first-year plunge globally among IPOs that raised at least the same amount since Spain’s Bankia’s 82% drop back in 2012. 

In the one year since its listing, the shares of the fintech major have gone for a toss, pummeled largely due to negative market sentiment and apprehensions around the over-valuation of the stock. The Russia-Ukraine geopolitical crisis and a renewed investor focus on profitability have also sent the share prices southwards.

This comes at a time when Paytm stock has been witnessing an intense selloff on account of the expiration of the lock-in period for pre-IPO anchor investors. Such has been the extent that the share prices fell to a record low of INR 439.60 during the intraday trading on November 24. 

The effect was especially pronounced after tech investor SoftBank sold 4.5% of its stake in the fintech player worth about $200 Mn in a bulk deal. 

What has also led the investor to flee has been the recent announcement that deep-pocketed conglomerate Reliance Industries would demerge its financial services arm into Reliance Strategic Investments, which will be subsequently be renamed as Jio Financial Services. 

Citi Bullish On Paytm

Even as the crisis unravelled on Thursday, brokerage firm Citi said that overhanging risks for the fintech major, such as competition and selloff by existing pre-IPO shareholders, appeared ‘overdone’ at the prevailing valuations.

Despite Paytm shares plummeting for the fourth consecutive day, Citi cited a potential upside of 139% and suggested a target price of INR 1,055.

“We value the Payments business on an EV/GP basis at 13.5x Sep’24E (at par with global payment companies) resulting in Rs 466/share (Rs 429/share earlier). We value the Financials Services business at Rs 375/share (Rs 353/share earlier). We value the commerce and cloud vertical at Rs 81/share. Overall, this approach yields a TP of INR 1,055,” noted the report.

Citing the recently released half-yearly report of tech investor Prosus which owns competitor PayU, Citi said that Paytm was witnessing faster growth in active customer base in the BNPL segment compared to PayU.

In Q2 FY23, Paytm reported a net loss of INR 571 Cr, up 21% year-on-year (YoY) from INR 474 Cr in Q2 FY22. Revenue from operations, however, surged 76% YoY to INR 1,914 Cr in the September quarter of FY23.

Despite the headwinds, the fintech major saw an overall increase in merchant subscription revenue, bill payments and loan disbursements on its platform. 

The downturn is emblematic of all major Indian new-age tech stocks, from foodtech major Zomato to beauty ecommerce player Nykaa. From their record highs, Zomato’s stock has plummeted by 60%, while Nykaa’s share price has tanked by more than 94%.