Paytm, India’s Largest IPO, Sees Slow Subscriptions

Analysts are concerned about the profitability of the Indian payments provider Paytm, following a day in which subscriptions to the company’s $2.5 billion share offering moved at a tepid pace.

Paytm went public on Monday (Nov. 8) in India’s biggest-ever IPO, backed by firms such as SoftBank, Ant Group and Berkshire Hathaway.

As Bloomberg News reported on Tuesday (Nov. 9), about 48% of the issue had been purchased through 5:00 p.m. in Mumbai.

The portion reserved for retail investors was fully subscribed, but those for institutional investors and wealthier individuals had only been partially sold. As Bloomberg noted, this is in sharp contrast to the heavy demand from anchor investors, whose allocation was oversubscribed several times last week.

Read more: Paytm IPO Target Jumps to $2.4B+ After Stock Dilution

“These are very high-risk bets,” Rakhi Prasad, an investment manager at Alder Capital in Mumbai, told Bloomberg TV. She said Paytm has the strength of being the biggest digital payments network from a merchant’s point of view, with “a long runway” to capitalize its size and generate profit.

According to the Bloomberg report, the public issue will likely be fully subscribed before it closes on Nov. 10, but its performance is just a shadow of recent IPOs, such as the beauty startup Nykaa and the food delivery service Zomato, both of which were fully sold on their first day.

Read more: Lucrative India Delivery Market Bolsters Zomato Stock Despite Company Taking Earnings Hit

Paytm reported a 10% decrease in revenue for the 12-month period ending in March 2021, following increased competition from Flipkart and Amazon. The company has continued to post losses despite freeing up cash and cutting marketing costs, per the Bloomberg report.

“Given the market euphoria and the flush of liquidity, the issue will be fully sold, but we don’t expect big manifold subscriptions, given the large size of the share offering and also some investor fatigue after a stellar run for most IPOs this year,” said Aditya Kondawar, CEO of the Mumbai financial advisory firm JST Investments. “Investors are turning a bit cautious, as economies around the world are now looking at normalizing easy policies that had been flooding the market with liquidity.”