Sunday, Aug 14, 2022

Will Paytm Shares Bounce Back After Disappointing Market Debut? Here Is What Analysts Say

Shares of One97 Communications, the parent firm of Paytm, listed at a 9 per cent discount on the bourses on November 18, debuting at Rs 1,955 per share.

Even though Paytm is India’s biggest digital platform, it could not show its magic on the day of its debut at the stock market, with the company’s share plunging 27 per cent, shattering hopes of investors.

Shares of One97 Communications, the parent firm of Paytm, listed at a 9 per cent discount on the bourses on November 18, debuting at Rs 1,955 per share. However, 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.

On the whole, 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. 

Going forward, investors must be keen on knowing what could be the stock situation considering its disappointed show. Is it a good t8me to buy or it can slip down further, these are some questions that investors would be interested to know?

Here are the views of some analysts on the Paytm shares, according to a report in Business Standard.

AK Prabhakar, Head of Research at IDBI Capital

Considering Paytm’s weak financials, investors should track quarterly results over the next 1-2 years before taking any position.

Macquarie Group

The global brokerage firm 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.

Anurag Singh, Managing Partner at Ansid Capital

Moving further, it is unlikely that stock will bounce back. “I'll be surprised (if it does) with this kind of interest. And, this is the problem of all of these frenzy IPOs, if it starts tumbling, then it takes all other IPOs together with it. If you're holding something and it keeps growing, investors have confidence but the moment it starts tumbling, I think that's where everybody becomes a seller,”he said.

He said there was a bit of a demand and supply mismatch due to which the right price discovery isn't happening in a lot of these new-age IPOs. Paytm asks for a $20 billion valuation. “On this valuation, it is saying that I am 20 per cent of HDFC Bank, 40 per cent of Kotak Bank and I am 65 per cent of Axis Bank. This is pure financial insanity and I don't think that this kind of pricing ever made sense et al,” he added.

Ajay Bagga, Market Expert, and Investor

"The valuations of Paytm were very high and steep. The fundamentals were not in keeping. It was the India growth and digital growth story which was sold and clearly, the markets have turned skeptical about it. Be wary, look at the valuations, and see what you are buying. Don't go by the momentum and the frenzy that's gripping the markets right now."