One 97 Communications Ltd, which launched India's first digital mobile payment platform, Paytm App, in 2009, went public through an Initial Public Offering (IPO) of shares with face value of Re 1, priced at Rs 2080-Rs 2150 per equity share, Chittorgarh. On listing on stock exchanges yesterday, price of shares fell precipitously. "Digital payments start-up Paytm made one of the worst major stock market debuts on Thursday as its shares fell more than 27% after India's largest ever IPO," Reuters. "While some investors had questioned Paytm's lack of profits and its lofty enterprise value of 27 times gross profit, the extent of its price fall shocked many and wiped more than $5 billion off Paytm's valuation." "The company's market cap settled at $13.6 billion, lower than the $16 billion valuation it commanded at its last private fundraising in November 2019. Its early backers, including SoftBank, Ant Group, Alibaba and Elevation Capital still made money from the listing," ET. Encouraged by listings of Zomato and Nykaa, Paytm might have valued its shares at extravagant levels. "India's leading food delivery company Zomato made a stellar debut on Dalal Street on July 23 as the stock opened at Rs 116 on NSE, a 52.63 percent premium to its final offer price of Rs 76. The listing price on the Bombay Stock Exchange was at Rs 115, up 51.32 percent," Moneycontrol. "Nykaa shares started trading at a premium of over 82% at Rs 2,054 per share on the NSE as compared to its IPO issue price of Rs 1,125 apiece. On the BSE, Nykaa shares listed at Rs 2,063," India TV. Ajit Ranade listed 7 reasons for Nykaa's spectacular success. It actually makes some profit, it offers Indian women a wide choice and experience of cosmetics for the first time, it is allowed to hold inventory and has 80 physical stores. Why did the market reward loss-making Zomato but punished Paytm? "Is it because Paytm is largely a Chinese company, with Alibaba, Ant Group and SAIF Partners owning 54% of the shares before the IPO? NDTV. Or it maybe because, "If one believes the estimates made by CMIE's Mahesh Vyas, then just about 23 million households in India earn more than five-lakh-rupees per year (less than Rs 42,000 per month). That is about 7% of all Indian families. This is broadly the size of India's buying classes, of people who can afford various kinds of goods and services." "The lesson is this; if you buy something at a wrong price, that bad decision hounds you for a very long time," said Anurag Singh. "My favorite example is Microsoft. It was a great company in 2000. If you bought it at $60 in 2000, you had to wait 16 years till 2016 to just break even." Even the broader market is overvalued. "Valuations of Indian equities seem stretched by most conventional yardsticks, such as price-to-earnings multiples and yield differentials with benchmark bonds, but the trend among promoters to steadily raise ownership in listed companies reflects the confidence they have in their businesses, central bank economists said in their latest report on the state of the economy," ET. "CLSA has called for booking profits in Indian equities citing rich valuations, margin pressure and a high probability of earnings disappointment," ET. Foreign funds hold Rs 54.7 trillion worth of Indian shares, TOI. If they sell a large chunk of shares the rupee could come under pressure. A definite worry.
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