Paytm’s catastrophic stock market debut could impact other initial public offerings (IPOs) including that of state-owned Life Insurance Corporation of India (LIC), Ashneer Grover, founder and chief executive officer of BharatPe, said on Monday.
He said the debacle was a collective failure of the management and investment bankers.
“There is a company which for the last three years has stagnated in terms of growth and then it comes to the market saying it wants to do a $20-billion IPO, positioning itself as the largest start-up out of India and positioning it as the biggest IPO. When you are doing that, the basic thing that you have to take into account is do you have the demand at those price levels. In this case, the company did not look at where the market is and went ahead and priced itself where it wanted to,” Grover told CNBC TV18. Paytm’s Rs 18,300-crore managed to garner just 1.89 times subscription, with mutual funds and wealthy investors largely shunning the issue. The offering managed to scrape through on the back of large investments by foreign funds such as BlackRock and Canada’s CPP. “It’s a cumulative failure of the management and the bankers to keep the management honest,” Grover said. The company had valued itself at Rs 1.39 trillion ($18.6 billion) in the IPO. At the last close, Paytm was valued at less than $12 billion. “Paytm has been losing market share ever since UPI came in. Companies like PhonePe, Google Pay, and even BharatPe took away market share from Paytm. If PhonePe, the largest UPI player, is valued at $9 billion, how can you value yourself at $20 billion. What is the basis for it? It’s just because they got a valuation of $16 billion in their last round of funding,” he told CNBC TV18.