Despite Paytm’s lackluster listing, Chinese investors Ant Financial, Alibaba make $1 bn

Even as the retail and institutional investors were in for a mild shock when financial services firm Paytm debuted on the stock exchanges at a 9 per cent discount to the IPO price band, the company’s biggest shareholders, including Chinese tech behemoths Ant Financial and Alibaba earned nearly $1 billion by selling a part of their stakes in the firm. Both Chinese investors sold an aggregate of 6 per cent stake in Paytm. Ant Financial diluted its stake from 28 per cent to 23 per cent whereas Alibaba’s stake post IPO was down from 7 per cent to 6 per cent in Paytm.

Japanese investment vehicle, Softbank too made $400 million with a post IPO stake at 16 per cent, while Elevation Partners -- one of the earliest backers of Paytm -- sold shares worth $400 million with a post IPO stake at 15 per cent.
The company was valued at $20 billion, which, according to an earlier statement by the company founder and CEO, Vijay Shekhar Sharma, was at the lower end of the prices which his fintech firm commanded from the investors.

Paytm was looking to raise Rs 18,300 crore with an offer for sale component aggregating to Rs 10,000 crore whereas the fresh issue comprised of Rs 8,300 crore. The IPO was open to institutional/ retail investors from November 8 to November 10, at a price range of Rs 2,080 – Rs 2,150 per equity share.

The Paytm issue was subscribed by 1.89 times earlier this month with retail portion and qualified institutional buyers (QIB) subscription at 1.89 times and 2.79 times, respectively. The non-institutional investors (NIIS) demand remained flat with subscription only by 0.24 times.

On Thursday, the listing day, Paytm’s shares traded at a 22 per cent discount to the IPO price band, thereby proving to be a disappointment to the new investors who got on board during the IPO. The market cap of the digital financial services firm stood at Rs 1.1 lakh crore ($15 billion).

Brokerage analysts and market observers have ascribed a mixed rating to the Paytm listing. Research firm, Macquaire assigned its lowest rating at 'underperform' to the company saying that Paytm has a lack of focus and direction in the payments platform's business model, as per a report titled 'Too Many Fingers in Too Many Pies'. It added that the company’s path to profitability looks like a challenging task and that dabbling in multiple business lines inhibits Paytm from being a category leader in any business except wallets, which are becoming inconsequential.

While the concern of overly priced IPO had sparked criticism for Paytm, the company said in its RHP that the ecosystem allows it to address large market opportunities, and its network effect creates advantages for the firm.

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