Paytm Listing on BSE, NSE: The stock of One97 Communications, the parent company of Paytm, got listed at the Dalal Street on Thursday, November 18 in a tepid manner. At the National Stock Exchange, the opening price of Paytm stock was at a discount of about 10 per cent at Rs 1,950. Paytm share opened at Rs 1,955 on Bombay Stock Exchange, an decrease of 9.07 per cent discount over the higher end of the issue price of Rs 2,150 per share. The shares further dipped to Rs 1,806.65 minutes after 10 am, which is a decrease of 15.97 per cent at the BSE. At the BSE, too, the Paytm shares dipped further post 10 am.
As Paytm shares kept dipping further, international brokerage house Macquarie gave an underperform rating on One 97 Communications, saying that the company lacks a proper business model. It also called Paytm a ‘cash guzzler’, keeping the target price at Rs 1,200, which is a 44 per cent downsize.
“Dabbling in multiple business lines inhibits PayTM from being a category leader in any business except wallets, which are becoming inconsequential with the meteoric rise in UPI payments. Competition and regulation will drive down unit economics and/or growth prospects in the medium term in our view,” said the research house in a note, several media houses reported.
“Therefore, question its ability to achieve scale with profitability. We value the stock using a 0.5 times PSG multiple on December 2023 annualised sales to arrive at our target price of Rs 1,200, implying 44 per cent downside The key game changer could be an ability to monetise UPI, which could completely swing the investment case. A 10bp fee on UPI provides a fair value of Rs 2,900-3,300 based on PSG/DCF,” it added.
Digital payments platform Paytm’s parent company One97 Communications, which floated its maiden public offer days back, made a rather disappointing debut at the Dalal Street amid tepid response from buyers. The Paytm IPO opened for subscription from November 1 to 3. The payments platform fixed the price band of the issue at Rs 2,080 – 2,150 per share. The company has said that it plans to raise Rs 18,300 crore from the issue. The offer was a combination of fresh issue of Rs 8,300 crore and an offer for sale of Rs 10,000 crore by selling shareholders including founder and investors.
“Macquarie’s MGRS (governance and risk scoring) system places Paytm below median. Obtaining a small finance bank license could be difficult in our view given that Chinese controlled firms own more than a 30 per cent stake in Paytm,” said Macquarie in the report.
The report expressed dissatisfaction with the company’s “complicated organisation structure, related-party transactions, churn in top management and a thinly staffed board with 75 per cent of members being based out of India.”
The research paper, authored by Macquarie Research analysts Suresh Ganapathy and Param Subramanian, said that they expected Paytm to let out positive free cash flow (FCF) only by FY30, despite considering a whopping 50 per cent compounded annual growth rate (CAGR) increase over the next five years in non-payment business revenues led by distribution business.
During the offer, One97 communications, the parent company of Paytm, received bids for 9.14 crore shares against 4.83 crore shares offered for sale. Qualified institutional buyers subscribed 2.79 times the portion reserved for them, while retail buyers bid 1.66 times the part set aside for them. Non-institutional buyers booked 24 per cent of the shares kept aside for them.
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