paytm stocks: gray market signals muted listing for Paytm
On Wednesday, a day before its listing, shares in Paytm’s parent company One97 Communications traded hands at a premium of just Rs 20-25 over the final issue price of Rs 2,150 on the gray market. On Tuesday they were trading at a premium of just Rs 30, a mere 1.4% increase from the final issue price,
according to IPO Watch.
The share was trading at Rs 2,300 per share on the gray market on November 7, a premium of Rs 150 or 7% over the issue price. This fell to Rs 80 on the first day of the IPO and at the close of the issue on November 10 it was at Rs 40.
Gray Market Premium (GMP) is a term used in the IPO market and refers to the estimated price at which a stock could be listed. The gray market is unofficial, but investors use GMP as an indicator of the stock’s performance on the quotation. GMP, while a useful indicator, is by no means foolproof. Sometimes it predicts the listing price accurately and sometimes it doesn’t.
Flat ad expected
Dealers who follow the gray market said ultra-expensive prices, poor financial results and moderate growth prospects were the main reasons for the bad listing.
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Abhay Doshi, co-founder of UnlistedArena, said Paytm was likely to be a flop in its early days, despite the hype it generated as the largest IPO in India. “The valuations of the issue were expensive. In addition, the company has not shown any significant performance in the financial field and it is losing market share,” he added.
Ankur Saraswat, research analyst at Trustline Securities, said the company would do a flat listing. “New investors should wait for a significant correction in stocks and then step into this fintech giant,” he added.
Lukewarm IPO from Paytm
During its IPO, held between November 8-10, Paytm raised Rs 8,300 crore by issuing new shares, while existing shareholders and promoters sold shares worth Rs 10,000 crore. rupees as part of the offer for sale.
The IPO was only subscribed to at 18% on the first day of the tender, with the company having received offers for 88.21 lakh of the 4.83 crore of shares offered. On day 2, it was 48% underwritten, with 2.34 crore bidding received. India’s largest IPO was fully subscribed on day 3 and ultimately went through 1.89 times.