Paytm's Rs 18,300-crore IPO muted at 1.9 times subscription on Day 3

India’s largest initial public offering (IPO) by digital payments major Paytm’s parent company One97 Communications received a lukewarm response from investors, garnering just 1.9 times subscription. Nearly 80 per cent of the bids in the IPO came from overseas investors.

The institutional investor portion of the issue was subscribed 2.8 times; the wealthy investor portion saw just 24 per cent subscription; and the retail part was subscribed 1.7 times. Domestic institutions, including mutual funds, placed bids worth just Rs 155 crore, the data provided by the stock exchanges showed on Wednesday.

The response to Ant Group-backed Paytm’s IPO was in contrast to other start-up IPOs. For instance, the IPOs of Zomato and PolicyBazaar were subscribed 38 times and 82 times, respectively. The price band for the Paytm IPO was set at Rs 2,080-2,150 per share. At the top end, the company is valued at Rs 1.39 trillion.

Market experts said domestic investors shunned the IPO as a high-risk bet. Most brokerages had advised their clients to subscribe to the IPO with a long-term view.

“The company exhibits substantial growth in user base and gross merchandise value (GMV) since its inception within the fintech sector. Moreover, the business is scalable due to high convenience of digital banking,” Canara Bank Securities had said in a note advising its clients to “subscribe for the long term”.

Through the IPO, Paytm raised Rs 8,300 crore in fresh capital, and the remaining Rs 10,000 crore was an offer for sale.

Paytm, which started off as a mobile wallet in 2009, has gone on to add many businesses —  Paytm Payments Bank, Paytm Payments Gateway, Paytm Payout, Paytm Money, Paytm Insider, Paytm Insurance, Paytm Postpaid (Buy Now Pay Later), Paytm for Business, Paytm Credit Cards, and Paytm First Games, besides utility bill payments, offline merchant payments, rental payments, etc.

“A strong 33 per cent CAGR in GMV over FY19-FY21, despite the pandemic, vindicates Paytm’s leadership and brand value. This along with 17 per cent estimated CAGR in digital payments in value to $40 tn during FY21-FY26E indicates a sustainable growth in the long run,” said a report from Reliance Securities.

“Given that the company’s ecosystem allows it to address large market opportunities, scale and reach, product, technology and leadership, we give this IPO a ‘subscribe (long-term)’ rating,” said analysts from Anand Rathi. Analysts from the leading financial and investment advisory also listed Paytm’s ecosystem, trusted brand and scale, the company’s insights of Indian consumers and merchants, its technology DNA, leadership and culture as well as the network effect it creates as its strengths.

Paytm’s payments and financial services alone contribute almost 80 per cent to its revenue.

Paytm had closed India’s largest anchor round on November 3 as it raised Rs 8,235 crore. Blue-chip global investors and tech-focussed funds have made their first-ever investment in Indian public markets through the Paytm IPO while investment giants like Blackrock, CPPIB and GIC have made their largest bets in an Indian IPO.