Paytm parent’s IPO Sees Muted Demand on Day 1

The Rs. 18,300 crores public offer of One97 Communications, the parent company of Paytm, saw circumspect investor response on day 1, with 18% of the issue bid. India’s biggest public offer received bids for 8.742 million shares against the total issue size of 48.4 million shares.

The retail quota was subscribed 78%, whereas the quota reserved for non-institutional investors including high net worth individuals received just 2% subscription. The qualified institutional buyers’ portion was bought 6%.

To be sure, institutional bids typically come in toward the latter stages of an issue.

The Paytm offer opened for subscription on Monday and will close on Wednesday. It comprises a fresh issuance of equity shares worth Rs. 8,300 crores and Rs. 10,000 crores from existing shareholders’ offer for sale (OFS). The company has fixed a price band of Rs. 2,080-2,150 apiece, implying a valuation of around Rs.1.48 lakh crores.

While analysts are divided about the stock’s longer-term prospects, some of them recommend subscribing to the IPO only for listing gains.

Recommending Subscribing for the long-term perspective, Vikas Jain, analyst at Reliance Securities, said the IPO is valued at 43.7 times FY21 price-to-sales. That translates into a discount of 12% to the recently-listed unicorn, Zomato.

“While there is no listed peer available for Paytm in the domestic market, we believe high valuations for unicorns like Paytm that have created significant scale and brand equity are likely to sustain,” he added.

Arahant Capital, in a not, recommended subscribing to this issue for listing gains but said valuations are on the higher said.

Last week, the company raised Rs. 8,235 crores from anchor investors including Blackrock, Canada Pension Plan Investment Board (CPPIB), Aditya Birla Mutual Fund, and GIC Pte. While Blackrock invested Rs. 1,045 crores, CPPIB and GIC invested Rs. 938 crores and Rs. 533 crores, respectively. S-ET

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