Diminishing grey market premium and weak market sentiment over the last few days has led analysts to believe that Paytm stocks might list flat or at a marginal premium to IPO price.
Paytm shares will list on the stock exchanges today in a few hours, marking a successful end to the largest IPO ever to enter Dalal Street. However, diminishing grey market premium and weak market sentiment over the last few days has led analysts to believe that Paytm stocks might list flat or at a marginal premium to the issue price of Rs 2,150 per share. Paytm, a fintech giant, backed by Ant Group, raised Rs 18,300 crore from the primary market which saw marquee investors such as BlackRock and Government of Singapore participate as anchor investors. The IPO was subscribed 1.89 times at the end of the three-day share sale.
Grey market premium diminishes
“The market sentiments are not robust, EV/Sales valuations are on the higher end. The grey market premium of Rs 30 also points towards a flattish listing,” Divam Sharma, Co-founder of Green Portfolio, SEBI registered PMS, told Financial Express Online. He added that he expects a flat to 10% premium on Paytm stocks on listing. Paytm shares were trading at a heavy premium of Rs 150 per share last week, but the same has now diminished.
The falling premium could be on the back of poor subscription, indicating low demand and extremely lofty valuations with strong competition dampening investor sentiment, according to Pavitraa Shetty, Co-founder & Trainer, Tips2Trades. Paytm IPO was subscribed fully by retail investors and institutional investors; however, NIIs did not fully subscribe their portion of the issue. “Despite an IPO frenzied year where many startups have been listed at tremendously high valuations, current GMP of Paytm suggests a modest listing gains of around 1-4% for investors,” Pavitraa Shetty added.
Book any profit on listing
Analysts advise investors to book any profit on listing while investors looking to buy Paytm shares have been told to wait for a meaningful correction. “Investors are advised to book profits on listing gains and await a decent correction of at least 15-20% to re-enter for better returns in the coming months,” said Pavitraa Shetty of Tips2Trades. On similar lines, Ankur Saraswat, Research analyst at Trustline Securities, said investors could book listing gains and new investors have been advised to wait for meaningful correction to enter.
On the other hand, Divam Sharma of Green Portfolio is telling investors to look at Paytm as a long-term bet. “Investors who got allotment should be looking at Paytm as a long-term allocation. This is a high growth story which still has miles to go. Their leadership in payments and diversification towards ecommerce, cloud services and financial services should ensure high growth for the company in the coming years,” he said.
Heavy competition in fintech sector weighing on Paytm?
Paytm, unlike the recently listed internet stocks such as Nykaa and Zomato, comes from the fintech space which sees heavy regulations and strong competition. Further, analysts say, Paytm is still to turn profitable which makes the demanded valuation too expensive. “Paytm is still a loss-making company business model and on top of that more losses are expected ahead as the company strategy is to grow its consumer base, merchant base, advanced technology platform and rapidly scale up business. So, it looks like a cash burning machine,” said Ankur Saraswat of Trustline securities.
Paytm has a large customer base with 333 million total customers, 114 million annual transacting users. “Unlike Zomato and Nykaa, PayTM is in a very competitive space which will reduce its ability to grow profitably for quite a long time. The IPO saw poor response from HNIs and we do not expect any aggressive buying to emerge even at a lower price,” said Abhay Agarwal, Founder and Fund Manager, Piper Serica, SEBI registered PMS.
Reference Link – https://www.financialexpress.com/market/ipo-news/paytm-ipo-shares-list-today-muted-listing-expected-grey-market-premium-dries-up-should-you-buy-sell/2371410/