Can Paytm spring a surprise after a forgettable market debut?

Even though Vijay Shekhar Sharma-owned Paytm is India’s biggest digital payments platform, the feat wasn’t enough to please Street investors.

Shares of One97 Communications, parent firm of Paytm, listed at a nine per cent discount on the bourses on Thursday, debuting at Rs 1,955 per share.

Soon after, the shares crashed 27 per cent against the issue price of Rs 2,150 and hit an intra-day low of Rs 1,564 apiece.

It must be remembered that the company’s Rs 18,300-crore offering, the biggest-ever in the domestic capital markets, had managed to sail through only on the last day of the offer. 

On an overall basis, the issue was subscribed 1.89 times, with the institutional portion getting a subscription of 2.79 times and the retail investor portion 1.66 times.

So, are these low levels a good entry point for new investors? Or is there more downside to this fall?

AK Prabhakar, who is head of research at IDBI Capital, says that given Paytm’s weak financials, investors should track quarterly results over the next 1-2 years before taking any position.

Meanwhile, global brokerage Macquarie has initiated coverage on the stock with an ‘underperform’ rating and a target price of Rs 1,200.

Calling the company a “cash guzzler”, the brokerage says Paytm’s business model lacks focus and direction, and achieving scale with profitability will be a big challenge given competition from Google and Amazon. Further, regulations and competition are added worries for the company.

That said, the key game changer could be Paytm’s ability to monetise UPI. A 10 basis point fee on UPI, the brokerage says, can lift the stock’s fair value to Rs 2,900-3,300 per share.

Apart from Paytm, Sapphire Foods also debuted on the bourses yesterday, delivering decent listing gains.

The shares of the company, that owns and operates Pizza Hut and KFC chain of stores, listed at Rs 1,350 per share, a 14 per cent premium over issue price of Rs 1,180.

Analysts suggest aggressive investors can hold the stock from a long-term perspective while short-term traders can keep a stop loss of Rs 1,100 for a target of Rs 1,500.

On Wednesday, markets ended lower for the third straight day amid selling in all but PSU bank stocks.

The BSE Sensex ended 372 points down at 59,636 while the Nifty50 shut shop at 17,765.

Escorts shares, however, stole the show in a weak market after they hit a fresh all-time-high of Rs 1,825 on the BSE. The shares surged 12 per cent intra-day after the company's Japanese partner Kubota Corporation agreed to acquire an additional 5.9 per cent stake in it for Rs 1,873 crore, taking the total holding to nearly 15 per cent.

Equity markets are shut today on account of Gurunanak Jayanti holiday.