Indices Conclude the Week on a Bearish Note
The Indian benchmark indices marked the end of a relatively underperforming week - the week ended Thursday November 19th - with yet another drop to settle in the red. BSE Sensex decreased by 0.72% to conclude the week at 59,575.28, whilst NSE Nifty 50 exhibited a similar pattern to shrink by 0.75% to remain below the 17,800 mark with a value of 17,764.80. Thursday’s performances marked the third consecutive day in which domestic markets have closed with decreases, primarily due to a continuation of global bearish indicators, in conjunction with PayTM’s futile debut.
Both benchmarks reiterated a pattern that has been ubiquitous throughout this week - commencing the days with marginal gains, only to end in the negative region. All of the sectoral indices, with the exception of the Nifty PSU Bank Index, also experienced losses. Broader markets were not devoid of this bearishness, as the BSE midcap and smallcap diminished each by 1.5%.
Metals and Auto indices further fell victim to these declines, with Nifty’s Auto Index and Nifty’s Metal Index falling by 2.61% and 2.59% respectively.
Saturnine international cues have propagated mild causes of concern for investors globally, with inklings of uneasiness becoming more prevalent particularly outside of the United States.
PayTM’s Opening Fiasco Disquiets Indian Investors
PayTM began its publicly listed tenure with blatant devastation as the company registered the single largest opening day fall by any company in over a decade, registering a mammoth 27% fall. This suboptimal performance has elicited a major shock amongst investors, primarily due to the largely commendable performances of IPOs in contemporary weeks.
The stock already encountered a turbulent start on its debut day, Thursday November 19th, opening 9.1% lower than its issue price of Rs. 2,150 per share, at Rs. 1,995. PayTM’s performance would only go on to exacerbate further from there, plunging by a grand total of 27.3% to conclude the day with a share price of Rs. 1560.
PayTM’s pre-debut fulfillments produced immensely extravagant intrigue, as the company was capable of raising Rs. 18,300 crore ($2.46 billion) through its public issue, enabling it to become the greatest amount of money ever raised through an IPO in Indian capital market history.
However, signs of skepticism began to readily accumulate after the company’s offer received only a subscription rate of only 1.89 times - paling in comparison to other recent IPOs, such as Nykaa and Zomato - displaying 82 times and 38 times subscription rates respectively.
PayTM’s debut debacle can be primarily attributed to feebleness in domestic equity markets, exaggerated valuations, a prolonged period of loss-making in the most recent financial years and quarters, as well as an uncertain and blurred business model. This is evidenced through the company recording a loss of Rs. 382 crore ($51.5 million) in the fiscal quarter ended June 2021.
PayTM’s Suboptimal First Impression Sets Up an Uncertain Path Ahead
The One97 Communications-owned company has instigated an aggravated level of disquietude and disconcertion in the midst of India’s IPO fever, and has come as an eye-opening exemplar of tempestuousness in the current Indian market. PayTM’s suffering is expected to become further inflamed from here, as evidenced through investment banking company Macquarie predicting share prices to diminish to Rs. 1,200 - which would serve as a 44% decline from its issue price.
PayTM founder and CEO Vijay Shekhra Sharma donned an optimistic outlook post the slide, in an interview with Reuters conveying “One day does not decide what our future is … There is a lot for us to bring to the markets and market participants.”
With input from Money Control, LiveMint & The Economic Times
Written and Edited by: Ronojoy Borpujari