Investments in start-ups may not always be sweet and lucrative. While investors saw their investments multiply in Zomato and Nykaa in the recent past, Thursday saw the much-awaited listing of Paytm and it was a damp squib with the shares shedding more than 27 per cent on the first day itself when compared to the issue price.
This would come as a huge disappointment to the vast investor community that was looking at a slew of start-up IPOs to invest with the view that their investments would see rapid growth, much like the valuations of these start-ups in the private funding market.
But the public markets are different. In the case of Paytm, investors who got shares in the company’s public issue ended Thursday poorer by nearly Rs 2,835 crore. This was the collective loss in the valuation of the shares that were allotted in the initial public offer earlier this month.
The digital payments and e-commerce entity had offered a total of nearly 4.9 crore shares to investors across categories including, foreign portfolio investors (FPIs), mutual funds, high net worth individuals and retail investors.
The shares were allotted at a price of Rs 2,150 per share, thereby, pegging the cumulative value of the shares at a little over Rs 10,403 crore. The huge fall on listing, however, brought down the value of these shares to Rs 7,569 crore causing a cumulative loss of Rs 2,835 crore.
Interestingly, Paytm is the first start-up to cause a loss to investors on the day of debut as all the start-ups that entered the markets recently – Zomato, Nykaa, Policybazaar – saw their shares gain ground on their respective day of debut.
Zomato, whose issue price was fixed at Rs 76, saw the shares closing at Rs 125.85 on the day of debut. Nykaa saw a strong listing with shares ending at Rs 2,206.70, nearly doubling from the issue price of Rs 1,125. Shares of PolicyBazaar closed at Rs 1,202.90 on the day of debut. Its issue price was Rs 980.
Market experts believe that the tepid listing of Paytm has not only led to a huge erosion in investor wealth but also could potentially impact the response to forthcoming public issues especially from the start-up segment.
“It’s a poor start to the listing life of Paytm. What has happened is beyond expectation and would have an impact on not only the existing new age companies but also the future IPO-bound companies, which are waiting in the wings. Post the setback, one can expect valuations of IPO-bound companies to moderate,” said Arun Kejriwal of Kejriwal Research & Investment Services.
“As far as Paytm is concerned, one should expect the management to come forward in the next couple of days and explain the business in some more detail so that investors holding the shares or waiting on the side-lines to invest can have better clarity,” he added.
Incidentally, the impact of Paytm’s poor listing was clearly visible on the listed start-up space on Thursday. Shares of PolicyBazaar lost nearly 9 per cent or Rs 115.50 while Nykaa also ended marginally in the red. Zomato was also down 1.28 per cent. Shares of Paytm closed at Rs 1,564.15.
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