Tech

Paytm listing debacle casts pall on pipeline of India tech IPOs

In early November, Paytm founder Vijay Shekhar Sharma visited Tirupati in the hills of southern India. Famous for promoting good luck and its own wealth, the temple was “a deserving place for Sharma to seek. [the] “God’s Blessing” before he launches the largest initial public offering in India.

IPO did not follow script on FinTech stock this week More than a third plunge In its first two days as a public company, it has become one of the worst debuts in the history of the Indian stock market. The group’s stock, which raised $ 2.5 billion and was worth $ 20 billion, has since bounced back, but is about 17% below the issue price.

This blunder spotlighted Paytm, its shareholders SoftBank and Alibaba, and lead managers of IPOs such as Goldman Sachs, Morgan Stanley and Citigroup. It also raised concerns from investors and entrepreneurs, and a series of expected uplifts of India that should have cemented the county’s position as a major destination for technology start-ups following the United States and China. I was afraid that it could go crazy.

“The concern for all of us is whether this will affect broader Indian technological sentiment. At one western bank, the head of the Indian equity capital markets said that one bad deal and one bad decision was Ringo’s. It can confuse the cart. ” “Evaluation will be very difficult.”

Indian fintech company Mobi Kwik has postponed its IPO originally scheduled for November, saying it will “list at the right time” this week.

Ashneer Grover, co-founder of FinTech BharatPe, said Paytm “ruined” the Indian market. “Nothing goes into this market,” he told the website Moneycontrol.

Sandeep Murthy, a partner at Mumbai’s investment group Lightbox, said FinTech’s list may have a “some cooling period” until early next year, but argued that it was “natural.”

According to Dealogic, Indian tech companies have raised a record $ 5 billion through listings this year, about 10 times more than last year’s total.The country has emerged as Major beneficiaries Persistent regulatory crackdowns on Chinese tech companies have turned international investors elsewhere.

Food delivery company Zomato, which went public in July, has doubled its share price from its IPO price, overcoming skepticism about cashburn and valuation. Shares of insurance aggregator Policy Bazaar and beauty platform Nykaa have also rebounded since their debut earlier this month.

However, Paytm’s much larger list accounts for about half of the total raised through India’s technology IPO this year and is at risk of casting a shadow over others.

Founded 11 years ago, Paytm has grown into one of India’s most famous technology brands thanks to its mobile wallet. The charismatic Sharma attracted major international investors, including Alibaba founder Jack Ma, Warren Buffett, and SoftBank CEO Masayoshi Son.

However, the introduction of the UPI digital payment infrastructure of the Government of India Weaken core businessPhonePe, owned by Google and Wal-Mart, is currently the market leader. While Paytm has diversified into everything from investment to insurance, it faces more established competitors in each sector and lacks clear areas of strength, analysts say.

Prashant Gokhale, co-founder of Hong Kong-based research group Aletheia Capital, shows that core businesses aren’t profitable and that the move to reduce marketing costs is trying to make better before listing. increase. “There was a lot of hype in Softbank and Warren Buffett,” he said.

One who is directly aware of Paytm’s debate about IPO pricing said there was too much liquidity to chase transactions, especially as the crackdown in China made it more attractive to India. ..

“Investors are anxious for their destination and have pushed up prices without improving fundamentals,” he said. “A lot of money chasing that deal that didn’t get it is probably happy now.”

Graph showing growth in investment in India's technology sector, which surpasses China

China’s massive ownership of Paytm also poses regulatory and reputational risks after India severely restricted China’s investment following military tensions last year. Alibaba and its financial arm, Ant, have sold their shares in the IPO, but together they own nearly one-third of the company.

The debut was compared to the disastrous list of Reliance Power in 2008. Reliance Power raised a record $ 1.5 billion before it plunged 17% on the first day of trading. The stock has never recovered, and this week it was trading 95 percent below their issue price.

Madhur Deora, Chief Financial Officer of Paytm, told the Financial Times that the company “focuses on our performance.” .. .. It is clearly up to the investor to decide how it will be converted into valuations, stock prices, etc. ”

Paytm’s painful debut argues that if it urges investors to consider other high-value, well-promoted Indian tech companies that are skeptical, it may ultimately prove a blessing. There are also people.

“At least it was encouraging for me [was] Seeing that the market wasn’t in an unreasonable vibrancy, “Lightbox Mercy said of the company’s debut. “If the market is blindly evaluating things, it’s [be] It will be a bigger challenge in the future. “

According to Goldman Sachs analysis, the average price-to-sales ratio of potential IPO candidates for Indian companies has been 21 over the last three years and 3 for the entire group of Indian benchmarks Nifty Index. ..

Among the most prominent upcoming lists is Budget Hotel Group Oyo, who submitted the draft prospectus. Raise $ 1.1 billion last month. Softbank-backed CEO Ritesh Agurwal sought to make Oyo the largest hotel company in the world just to significantly reduce his ambitions in the face of a liquidity crisis.

Ora, a portfolio company of Softbank, a ride-sharing group, will also submit a prospectus within the next few months. The company is currently focusing on manufacturing cheap electric scooters, but delivery of new bikes has been repeatedly delayed.

Mohit Nigam, fund manager for Hem Securities in Mumbai, said: “We investors need to pay attention ahead of future IPOs, because these people can’t overlook profits and cash flow, no matter how good their business is …”

Rajan Anandan, head of Sequoia Capital India, argued that it was premature to judge Paytm’s long-term outlook, but acknowledged the risk of a plunge in technical assessments in India and abroad.

“At some point, there will be corrections in the public and private markets,” he said at this week’s FT-Indian Express event. “When that happens, it will affect everyone.”

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Paytm listing debacle casts pall on pipeline of India tech IPOs Source link Paytm listing debacle casts pall on pipeline of India tech IPOs

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