In March 2021, when SEBI decided to ease the norms of public listing for startups the reaction from the entrepreneurs’ community was overwhelming. The immediate excitement and energy were electrifying. It was giving a sense that the next big thing had arrived for all the Indian startup unicorns who were riding high on the valuation and investors’ money. Among all, the biggest celebration was for Paytm – the poster boy of the fintech revolution in India.
Nearly after 6 months, on November 08, Paytm IPO debuted with a bang – India’s biggest IPO ever. The whopping $2.47 billion (Rs 18,300 crore) Paytm IPO was on the floor expecting to create the magic that the earlier two immensely successful startup IPOs failed to do so – being oversubscribed by 100 times.
By then Zomato and Nykaa already set the bar. Zomato launched its IPO on 14 July and received a stupendous response from retail and institutional investors. The result – Zomato IPO was oversubscribed by 38 times. Zomato was off to a great start and the unprecedented response on the listing date, July 23, gave the much-required confidence to investors across the country to go all out for startup IPO. With nearly 100% listing gains people doubled their investment in Zomato stock within 10 days. Nykaa, on the other hand, raised the bar further by being oversubscribed 78 times. Like Zomato, Nykaa’s investors received 100%listing gain on the very first day of listing.
The tone of the market and bar to beat was set for India’s much-awaited and biggest IPO ever.
On November 08, 20121 when the mega IPO of paytm was launched little did anyone know that retail investors have had different views and plan to execute. After three days, as SEBI released the data of Paytm IPO subscription, it became clear that retail investors gave a cold shoulder to India’s biggest IPO, which was expected to be oversubscribed by 100 times.
Paytm IPO was oversubscribed but failed to meet – forget beating – the market expectations. By being oversubscribed nearly two times only, Paytm IPO left people stunned who were expecting an overwhelming market response and listing gains, similar to Zomato and Nykaa. Paytm is scheduled to get listed on November 18, and those who have been lucky enough to get hold of Paytm stock slots in IPO are now keeping their fingers crossed.
In the last four days, enough has been discussed about the not-so-overwhelming response received by Paytm. Internet is flooded with takes of fund managers, investment advisors, and market analysts on Paytm IPO response.
Many believed that the writing was on the wall, but Paytm management decided to turn a blind eye to it. Many fund managers who are vocal about their views on Paytm IPO stated that the price of Rs 2080 – 2,150 apiece for a loss-making company for eight years in a row and has no visibility to profitability is just too much to ask. Questioning the valuation of Paytm, there are many who believe that Paytm is indeed a promising company but fails to justify its asking valuation.
“In every Paytm business there is already an incumbent player and there is no clear path to profitability. When you combine that with the valuation, it just doesn’t sit right,” said a fund manager with an investment firm that has stakes in several Indian startups, but decided against investing in Paytm.
Not everyone is discouraged by the response received by the Paytm IPO. A sizeable number of analysts, however, put their weight behind Paytm and believe that subscription level of 1.89 times was on a par with other major global issues. They also emphasized the fact that oversubscription of IPO eclipsed the pricing debates which showed that Indian investors had confidence in digital businesses. But when asked about the listing gains same as Zomato and Nykaa they refrained from commenting on the same.
It is a little early to tag Paytm IPO with words with ‘disappointing’ and ‘failed’, but looks like the prospective investors of other IPO-bound startups have apparently learned their lesson.
Mobikwik, another IPO-bound fintech startup, has run into trouble as the impact of the market response received by Paytm IPO is quite visible.
According to a media company TheMorningContext, two marquee investors of MobiKwik have decided to pull back. Eastspring Investments and Nomura are no more willing to be a part of MobiKwik’s IPO journey for reasons unknown. The sudden change of hearts of the two lead investors of Paytm’s arch-rival has jeopardized the long-in-work IPO plans of MobiKwik. It’s being suspected that the seeking value of MobiKwik is one of the primary reasons behind their decision to back off at the last moment.
MobiKwik filed DRHP to raise Rs 1,900 crore via IPO in July. In mid-October, the fintech startup received approval from SEBI and started gearing up for the IPO with eyes set on $1 billion valuation.
The underwhelming response to Paytm IPO by retail investors has apparently caused damages to MobiKwik.
MobiKwik, however, is not the only one affected by the missing excitement towards Paytm IPO. PB Fintech Limited, which owns Policybazaar and Paisa Bazaar, which got listed on 15th November also couldn’t replicate the excitement received by Zomato and Nykaa on the first day of listing. The shares of PP fintech soared 23% on the very first day of listing. In no way, such listing gains can be tagged as underperformers and it failed to meet the excitement and people’s expectations which was built by IPOs listed before the debut of Paytm on the stock market.
Many analysts believe that the response to Paytm IPO has a far-reaching impact. It will force many IPO-bound startups to revisit their strategy, especially to re-evaluate their valuation and issue size. Eventually, a lot depends on the listing day of Paytm stocks. If it fails to impress the market, many startups could even delay their plans of IPO.
Other investment advisors that have decades of experience have no doubt that India is a massive IPO bubble. They believe the sooner or later the bubble will burst resulting in people losing billions of dollars of investment in buying stocks of startups that have been surviving only on investors’ money, have no sizeable assets, and have no visibility of a profitable business model.
All said and done, the unprecedented IPO wave in India has already set a new record. It’s expected that the amount raised by IPO will cross $13 billion by the end of 2021 – the highest ever in a year.
Will the excitement among the investors for IPO remain intact or it will turn out a massive IPO bubble, only time will tell. But for now, all eyes are set on Paytm stock listing which will set the mood of retail investors and help us to have clear visibility of upcoming startup IPOs.
What’s your take on the IPO wave in India? Do you think it’s time to go all out with investment in startups IPO or it’s an IPO bubble? Let us know your views in the comment section below.
