Paytm shares down 30% from all-time high! Is there more pain ahead?

Shares of Paytm (listed as One 97 Communications) tanked 13 per cent to hit an intraday low of Rs 1,297.7 on the Bombay Stock Exchange (BSE) as the lock-in period for anchor investors ended on Wednesday.

Anchor allotment is done a day before the initial public offering and provides an insight into the demand and quality of the issue. Only institutional investors are qualified to subscribe under the anchor quota. The investors can sell their holdings after the lock-in period ends.

The stock has been on a roller coaster ride since the company made its debut on Dalal Street and has tanked over 30 per cent from its all-time high of Rs 1,961.05.

The share price ended 7.72 per cent lower at Rs 1,380.05 against the previous close of Rs 1,495.45. Market cap of the firm fell to Rs 89,465.01 crore on the Bombay Stock Exchange.

More pain ahead?

Amid the ongoing selling spree, here's what experts say about the digital payments major.

"Although Paytm has shown good growth in terms of GMV (Gross merchandise value) and loans disbursed in comparison to the same time last year, our concern is that this growth is not profitable. Take rate for Paytm has reduced significantly from 2.18 percent in 2017 to 0.79 percent in 2021," Ujjawal Kumar, Research Analyst, Green Portfolio told BusinessToday.in.

"We believe the management is not focusing enough on profitability as pointed out by Aswath Damodaran as well in his recent advice. Unless we see profitable growth, we are not impressed and would stay away from the company. We also have to see how the other financial services products like insurance distribution, credit cards, etc. scale up," Kumar added.

"We are not so bullish on the stock and would wait to see significant outperformance in the non-payments business coming in at good profitability," he further said.

According to Abhay Agarwal, Founder, Piper Serica, Paytm shares will continue to be under pressure as there is no follow-up buying by large institutional investors even at this price. The main reason for this is the company’s inability to coherently articulate a path to profitability.

"We believe that long-term investors can look at this opportunity to invest in a business with a strong brand name but only after convincing themselves that the business will turn profitable at some time despite aggressive competition from other large players," he added.

Q2 earnings

The company extended its losses in the second quarter (July-Sept) to Rs 481.70 crore from Rs 376.60 crore in the first quarter (April-June) of 2021-22. The total income, however, increased by 19.62 per cent to Rs 1,134.50 crore in the same period.

The first half losses (April-Sept) stood at Rs 858.30 crore in 2021-22 as compared to Rs 723.60 crore in 2020-21. The total income jumped by 47.95 per cent to Rs 2,082.50 crore in the same period.

Paytm initiated its journey as a public company with a 27 per cent fall over its IPO (initial public offering) price on November 18. The scrip listed at a discount of 9.30 per cent at Rs 1,950 on the NSE against the issue price of Rs 2,150 per share.