Why Paytm is sinking further and how it stacks up against another fintech Policybazaar

by 5paisa Research Team Last Updated: 2022-12-10T17:09:30+05:30

If you thought that fintech major Paytm’s bad run was over, after a disastrous listing that saw its stock crash as much as 27% on the day it began trading on the stock exchanges last month, you may need a rethink.

In Wednesday’s opening trade, Paytm sank as much as 13% to a low of Rs 1,297.70 apiece, before recovering to cross Rs 1,400 levels. But it remains at a deep discount to its listing price of Rs 2,150 apiece. 

So, why is Paytm continuing to sink even further?

The counter is facing continued selling pressure as the lock-in period for its anchor investors is expiring. This would effectively mean that some of them would want to cash out, in a bid to cut their losses. 

Who were Paytm’s anchor investors in the IPO and how much money did it raise from them?

Paytm’s anchor investors ahead of the initial public offering included top global sovereign wealth and pension funds such as GIC of Singapore, Abu Dhabi Investment Authority and Canada Pension Plan Investment Board (CPPIB).

Other anchors included marquee global investors such as Blackrock, Fidelity, Standard Life Aberdeen, Alkeon Capital, UBS and US-based hedge fund Janus Henderson. 

The fintech company had raised Rs 8,235 crore from its anchor investors, out of its total IPO size of Rs 18,300 crore.  

BlackRock, CPPIB and GIC were among the top investors in Paytm’s anchor round and together invested Rs 2,516 crore, according to a Paytm filing to the BSE.

Who are Paytm’s top shareholders?

One97 Communications Ltd, Paytm’s parent company, is about 24.9% owned by China’s Alibaba-backed Ant Group. Alibaba itself owns a 6.27% stake in Paytm.

Japan’s SoftBank holds a 17.47% stake while Elevation Capital owns 15.1% and Berkshire Hathaway has 2.41%. Paytm founder Vijay Shekhar Sharma owns just an 8.9% stake in the company.

How did Paytm’s latest operating numbers look?

Paytm had recently announced an over two-fold rise in its gross merchandise value to about Rs 1,66,600 crore in the first two months (October-November) of the third quarter of this fiscal year, driven by sharp uptick in loan disbursals.

One97 Communications had recorded GMV of Rs 72,800 crore in the corresponding period a year ago.

“Growth momentum in GMV continues in the first two months of the quarter, due to strong performance during the festive season, which continues post festive season,” the company said in a regulatory filing.

Paytm said loan disbursals were up over four times to 27 lakh during the reported period, from 5.30 lakh a year ago. The value of loans disbursed increased to Rs 13,200 crore in October-November from Rs 280 crore a year earlier.

Paytm posted growth of 36% in monthly transacting users (MTUs) at 6.32 crore during the reported period, from 4.66 crore average MTUs in the first two months of the same quarter a year ago.

How has Paytm done compared to Policybazaar, the other big fintech that recently listed on the stock market?

Policybazaar operator PB Fintech had made its stock market debut on November 15. The company raised Rs 5,625 crore by issuing shares at a price of Rs 980 per share. It had raised Rs 2,569 crore from anchor investors.

The lock-in period for Policybazaar’s anchor investors has also expired, and that has indeed put some pressure on the stock.

Policybazaar had made a reasonably good debut, listing with a premium of 17% and jumping to its all-time of Rs 1,470 apiece soon after. However, it has slipped since then.

On Monday, the stock its all-time of Rs 1,076 apiece. The stock is currently trading around Rs 1,100 per share levels, more than 25% below its all-time high but still around 13% higher than the IPO price.

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