Paytm IPO: A Risky Bet That May Not Give Any ROI In A Short Term?

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Paytm may not be able to attain the success what Zomato got in the stock market! A fund manager stated that investing in Indian fintech company Paytm could prove a high-risk investment and may not see a significant jump when it is listed on stock exchanges after IPO.

“In Paytm’s case, where there is the strength of the network effects — it’s the largest digital payments from a merchant’s perspective — it has a long runway to capitalise on that and hopefully generate some profits along the way,” Rakhi Prasad, an investment manager with Alder Capital, said while discussing with Bloomberg TV’s anchors.

She believes that these are high-risk bets over the medium to long-term horizon. And, in the short-term, nothing is going to happen. Sounding as more of a warning, her statement clearly indicates that Paytm may fail to reach the same level, in terms of IPO gains, as seen in other companies.

Backed by Ant Group, Paytm’s $2.5 Billion initial share sale, which opened Monday, was the largest in India. It will close on November 10, with a price range of Rs 2,080 ($28.147) to Rs 2,150 per share. It has received strong responses from anchor investors like BlackRock Inc., and the Abu Dhabi Investment Authority.

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The fintech company’s name rhymes with ATM faces stiff competition from Alphabet Inc. owned GooglePay and Walmart-backed PhonePe. However, it holds the largest share in India’s merchant payment market. India’s mobile payments market is estimated to reach more than $2 trillion in 2024 and all the leading players including Paytm has set its eyes to capture the lion’s share of it.

Paytm’s first public offering comes at a time when India, the second-most populous country in the world, has seen a surge in the number of technology unicorns racing to public listing recently as the stock markets rallying towards record gains. The initial public offerings of Zomato, a food delivery startup, and Nykaa, a beauty startup were fully subscribed on the first day. This indicates that there is a lot of retail investor interest and Paytm don’t want to miss the bus.

On November 9, the second day of Paytm IPO, 48 percent of the Rs 18,300-crore IPO was subscribed. There were bids for 2.34 million equity shares in response to an offer of 4.83 billion shares. The reserved portion for retail investors subscribed 1.23 times, while institutional buyers submitted bids for 46 percent of the portion reserved for them.

However, a number of fund managers and market pundits have advised retail investors to make precautionary moves while buying Paytm shares during IPO in anticipation of big returns like Zomato.

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