Paytm market valuation hits a new low: India’s biggest IPO turned into the biggest jinx

Nearly two-third of Paytm's market value has vaporized in just 3 months, but Paytm's stock price is far from stabilization. So far, Investors have incurred a loss of billions of dollars, still staring at uncertainty. India's much-awaited biggest IPO has turned out to be the biggest Jinx for Vijay Shekhar Shama.

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The struggle for Paytm is far from over as the stock price of Paytm continues to decline despite the ‘buy’ call from a number of leading MFs and financial services companies. Today, as of February 24, 2022, the stock price once again crashed to Rs 790 from the closing price of Rs 823 a day before.

The constant drop in Paytm stock value has a direct impact on the market value of the company, making many marquee investors, including the Oracle of Omaha Warren Buffett, lose hundreds of millions of dollars.

Within just 3 months of listing, Paytm’s market valuation has tanked to just one-third, and many market experts see no sign of immediate recovery. In November last year, the fintech company aimed to attain a nearly $20 billion valuation with the issue price of Rs 2,150. The issue was oversubscribed by 2.7 times though, it received a lukewarm response from the retail investors. The impact of it was quite visible when Paytm had to list at a discounted price of Rs 1,955 crushing all the dreams of investors who participated in Paytm IPO in anticipation of huge listing gains like Zomato and Nykaa.

Since the listing day, on November 18, 2021, Paytm stock value has declined by nearly 64%. The worrisome situation for Vijay Shekhar Sharma, founder and CEO of One97 Communications Ltd, the holding company of Paytm, is only worsening as the negative sentiments seeded among the retail investors are keeping them away from the stock despite ICICI Securities, JPMorgan, Goldman changing their ratings in favor of Paytm.

As per today’s trading price, the market valuation of Paytm has tanked to just $6.7 billion, eroding the value of Sharma’s stake by $1.65 billion. As of the December quarter, Sharma owned an 8.9 percent stake in One 97 Communications. Besides, Axis Trustee Services also holds 4.9% stake on behalf of Sharma.

Many experts believe that the amplifying Ukraine-Russia crisis is causing more damage than the company’s own performance and challenges. The global stock market is heading towards a great crash if US, and UK join Ukraine in the war against Russia. Amidst the geopolitical tension between Russia and Ukraine, the Indian stock market is suffering just like many other markets in the world.

Unfortunately, Paytm was already under tremendous pressure before the fast-changing global equations. As the possibility of war can’t be ruled out now, retail investors have gone into the ultra-precautionary mode, taking most of the big and bullish investors away from the market.

The current advice that we are hearing from the stock market experts is about investing in safe smallcaps only.

Shankar Sharma, the ace investor and market veteran, advises people to stick to smallcaps. In a conversation with MoneyControl, he points out that three things usually happen in a war-like situation – markets sell-off, treasuries might rally and oil prices will skyrocket.

A company with a market value between $300 million and $2 billion is usually tagged with a ‘smallcap‘ in the stock market.

Vijay Shekhar’s aspiration to take the valuation of Paytm to a new height by going public has fired back drastically. Even after sliding to single-digit valuation, the fintech company is still not able to win the trust of the market investors. And, amidst the advice similar to Shankar Sharma, it has become an uphill battle for Vijay Shekhar and his team.

How long the fall would continue is difficult to answer now, but few stock market experts believe that the recent rating change by ICICISecurities and a few other leading investment firms, will definitely help Paytm to bounce back.

Does it mean that people must buy the dip in Paytm? Our advice would be to make careful moves as the volatility in the market is high and if the Russia-Ukraine crisis turns into a full-fledged war between US-Russia, we may be staring at the biggest market crash in a decade or two.


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