Indian mobile payments giant Paytm lost more than a quarter of its value on its market debut on Thursday after raising $2.5bn in the country’s biggest-ever IPO, as traders questioned whether the loss-making firm would ever turn a profit.
Asia’s third-largest economy has been in the grip of an initial public offering frenzy, with start-ups attracting billions of dollars in investment in a bright spot in the Covid-battered economy.
But while Paytm has established a leading position in the fast-growing marketplace for mobile payments it has lost money in each of the past three years and its market debut showed the limits of investor appetite.
Founder Vijay Shekhar Sharma, once named India’s youngest billionaire, wiped tears from his eyes when the national anthem was played at an opening ceremony before trading began at the Mumbai Stock Exchange.
Referring to the phrase in the anthem “Bharat bhagya vidhata” — “the one who will define the fortune of this country” — he said Paytm has “actually done that”. But the company’s shares dived at the open and finished at Rs1,650 ($21), down more than 27% from their IPO price of Rs2,150.
“There is a lot of euphoria for the digital space and that seems to now be subsiding,” said SMC Global Securities analyst Saurabh Jain.
“These companies are coming out with IPOs at scorching valuations and it’s anybody’s guess what valuations are correct,” he told AFP.
“It is very difficult for a company like Paytm to turn profitable. They have the scalability but they are not able to make money through their business model.” Following the debut, Paytm’s market capitalisation fell from an IPO valuation of $20bn to about $13.6bn at the close of trade.
Rakesh Mehta, a 49-year-old Kolkata-based rice exporter, said he had bought 12 shares worth Rs25,800 in Paytm, encouraged by Sharma’s bullishness about his firm. “I was shocked to see the price when it opened.
I didn’t get much of a chance to sell,” Mehta told AFP. “I was planning to sell 50% for listing gains and hold the rest.
Now I have no choice but to hold on.
If it goes anywhere close to my purchase price, I will definitely sell.
I wouldn’t want to risk holding it further.” Sharma, a schoolteacher’s son who says he learned English by listening to rock music — retains a 14% stake in the business, worth $2.4bn at the IPO price but approximately $540mn less by the close of trade.
Other shareholders include Chinese tycoon Jack Ma’s Alibaba group and associate Ant Financial, along with Japan’s SoftBank and Warren Buffett’s Berkshire Hathaway. 
Ant Financial sold 3.5% of its 28% stake in the IPO to meet regulatory requirements that no shareholder should own more than 25% of a listed company.
Alibaba continues to own another 6%. Paytm’s platform was launched in 2010 and quickly became synonymous with digital payments in a country traditionally dominated by cash transactions.
It has benefited from the government’s efforts to curb the use of cash — including the demonetisation of nearly all banknotes in circulation five years ago — and most recently, from the pandemic.