Paytm nears record low, down 13% as anchor investor's lock-in period ends

Shares of One97 Communications, the parent company of digital payments major Paytm, slipped 13 per cent to Rs 1,297.70 on the BSE in Wednesday’s intra-day trade as the mandatory one-month lock-in period for anchor investors expired today, December 15, 2021.

The stock was trading close to its record low of Rs 1,271.25 touched November 22, 2021. India's leading digital ecosystem for consumers and merchants had made stock market debut on November 18, 2021. It was down 40 per cent from its issue price of Rs 2,150 per share. The stock hit a record high of Rs 1,961.05 on November 18, but had failed to touch its issue price since post listing.

At 09:56 am; Paytm was traded 9 per cent lower at Rs 1,359 on the BSE, as compared to 0.44 per cent decline in the S&P BSE Sensex. The trading volumes at the counter jumped over three-fold with a combined 6.25 million equity shares changing hands on the NSE and BSE.

Paytm had raised Rs 8,235 crore from anchor investors as part of its initial public offering (IPO) of Rs 18,300 crore. The company had allotted 38.30 million equity shares to anchor investors at Rs 2,150 per share.

Top sovereign wealth funds and financial investors such as Singapore's GIC, Canada’s CPPIB, BlackRock, Alkeon Capital, Abu Dhabi Investment Authority were among those that allotted shares in the fintech major’s parent One97 Communications’ anchor slot. CLICK HERE FOR FULL LIST

Meanwhile, the stock of Paytm was quoting lower for the fourth straight trading day, having declined 19 per cent during the period.

The Reserve Bank of India (RBI) on Tuesday introduced a prompt corrective action (PCA) framework for large non-banking financial companies (NBFCs), putting restrictions on para-banks whenever vital financial metrics dip below the prescribed threshold. This brings them almost on a par with banks in terms of supervision and regulatory reach. This follows the scale-based regulations and revision in non-performing asset (NPA) norms brought in by the regulator for the sector, the Business Standard reported. CLICK HERE FOR FULL REPORT

While we like Paytm’s strategy to develop a digital ecosystem with its payments business as a fulcrum, presence in too many segments without leadership in none (except payments), should keep Paytm chasing monthly transacting users (MTU) growth instead of profitability/monetisation. In this backdrop, we find current valuations expensive especially when EBITDA breakeven is expected by FY27E as per our estimates. In addition, a complex group structure, large public float (owned by private equity players) would keep valuation multiples in check, analysts at JM Financial Institutional Securities said in company update.

Currently, Bank/NBFC’s are ready to remunerate the Paytm well given the significant data advantages it brings on the existing customer base. However, we believe over a period of time as larger banks/NBFCs themselves gear up with digital prowess, the propensity to remunerate should tend to reduce. In addition, given that the user growth of Paytm is quite rapid, incremental customers may not be the most lucrative customers from banks’ perspective. As a result, we expect take rates on distribution business to reduce going forward despite relatively underpenetrated customer base for Paytm, the brokerage firm said.