Shares in India's Paytm plunge 21% in first day of trade

[MUMBAI] Shares in Paytm plummeted 21 per cent in their market debut, valuing the Ant Group-backed digital payments firm at around 1.11 trillion rupees (S$20.2 billion) after it completed India's biggest-ever IPO.

Shares were changing hands at 1,705 rupees in early morning trade versus the offer price of 2,150 rupees.

Paytm, which also counts SoftBank among its backers, raised US$2.5 billion in its initial public offering, of which US$1.1 billion was from institutional investors. Last week it received US$2.64 billion worth of bids for the remaining shares on offer, or 1.89 times.

Analysts at Macquarie Research said in a note to clients that Paytm's business model lacked "focus and direction" and initiated coverage with an underperform rating. "Achieving scale with profitability a big challenge," the note said, calling the company a "cash guzzler".

The company, headquartered on the outskirts of India's capital New Delhi, priced its 85.1 million-share issue at the top of the range at 2,150 rupees each.

Engineering graduate Vijay Shekhar Sharma founded Paytm in 2010 as a platform for mobile recharges.

The company grew quickly after ride-hailing firm Uber listed it as a quick payment option in India and its use swelled further in late 2016 when New Delhi's shock ban on high-value currency notes boosted digital payments.

Paytm's success has turned Sharma, a school teacher's son, into a billionaire with a net worth of US$2.4 billion according to Forbes.

Its IPO has also minted hundreds of new millionaires in a country where per capita income is below US$2,000.

REUTERS