Paytm IPO: Issue subscribed 35% on day 2, retail portion fully booked; what should investors do?

India’s biggest-ever public issue, Paytm IPO received a 35 per cent application on day two of the bidding process.

India’s biggest-ever public issue, Paytm IPO received a 35 per cent application on day two of the bidding process. The issue received bids for 1.70 crore equity shares against an offer size of 4.83 crore shares so far on the first day of bidding. The portion reserved for retail investors saw 1.03 times subscription, while the reserved portion of non-institutional investors was subscribed just 3 per cent, and qualified institutional buyers have put in bids for 76.70 lakh shares against 2.63 crore shares reserved for them. Their portion was subscribed 30 per cent.

Zomato, Policybazaar, Nykaa, and now Paytm, all have played a vital role in bringing new millennials into the stock market. Analysts say that Paytm is going to open a lot of foreign direct investments (FDI) in India. This is great for the Indian economy as it is going to set a benchmark for new investments,” Rajesh Singla, Founder & CEO, PreIPO consulting firm Planify Consultancy, told Financial Express Online. Singla added that the digital payment world has moved pretty rapidly. Such has been the impact of digital payments in India, that other countries (10-23 countries) by next year will start accepting payments using UPI. This is going to be fruitful for India Rupee. “We feel Paytm is coming at a fair valuation and will see a lot of participation from the investors with Nykaa money coming back who didn’t get the IPO,” he added.

Paytm IPO: What should investors do?

Analysts said that despite being one of the early entrants in the digital payments and fintech space, Paytm continues to face tremendous pressure from other competitors especially Google Pay. “From an IPO valuations perspective, Paytm’s foray into other verticals like insurance, broking will yield better financial results in the future but current valuations remain very expensive. Investors should book profit on listing and wait for dips close to at least 15-20 % to buy at a cheaper price,” Pavitraa Shetty, Co-founder & Trainer, Tips2Trades, told Financial Express Online.

Vikas Jain, Senior Research Analyst, Reliance Securities, has recommended subscribing to Paytm IPO for long-term. The IPO is valued at 43.7x FY21 price-to-sales and 36.7x FY22 annualized price-to-sales, which is at 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 has created significant scale and brand equity, are likely to sustain. Further, a strong 33% CAGR in GMV over FY19-FY21, despite the pandemic, vindicates Paytm’s leadership and brand value. This along with 17% estimated CAGR in digital payments in value to US$40tn during FY21-FY26E indicates a sustainable growth in the long run,” he added.

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