One97 Communications, which operates Paytm, made a tepid debut on the bourses today, listing at 9 per cent discount against its issue price of ₹2,150.

The company listed at ₹1955 on the BSE, down ₹195.00 or 9.07 per cent from its issue price. Post listing, it slipped further to record a low of ₹1681.00. At 10:30 am, it was trading at ₹1668.30, down ₹481.70 or 22.40 per cent from its issue price.

It listed at ₹1,950.00 on the NSE, a 9.30 per cent discount. It was trading at ₹1,676.20 at 10:30 am.

Sluggish subscription

All eyes were on the listing of India's largest IPO - Paytm, which raised ₹18,300 crore in the IPO will make a debut at the bourses on Thursday. The company had fixed the IPO price as ₹2,150 a share, at the upper end of a price band of ₹2,080-2,150 a share.

The issue was subscribed 1.89 times overall. Paytm allocated shares worth ₹8,235 crore to more than 100 anchor investors, including the Government of Singapore. The IPO was subscribed 1.66 times by retail investors and 2.79 times by QIBs. But, it saw only a muted response from HNIs, whose portion received just 24 per cent.

Profitability a concern

According to analysts, one of the primary concerns among investors will be the profitability of the business.

Parth Nyati, Founder, Tradingo said, "The company has been loss-making, and there is no sign to turn profitable shortly. The company got listed at 1950 apiece on NSE, which was in line with our estimates."

"We feel due to the brand the company sought high valuation and it might see a correction in the near term," added Tyagi.

Santosh Meena, Head of Research, Swastika Investmart Ltd said, "The company has a huge customer base with strong brand positioning and it has an early mover advantage in digital payment services however it is still a loss-making company and very aggressively priced therefore we saw a tepid response in terms of subscriptions."

"It is difficult to value such kind companies for time being but by the time market will understand the way to value such kinds of businesses where the market will focus on how fast it will become profitable and how well it will use its strength to explore new businesses like Credit card and Payment banking."

Macquarie Research gave the stock an 'Underperform' rating and a target price of ₹1,200, implying over 40 per cent downside. As per its report, achieving scale with profitability is a big challenge for the company, with regulations and competition being added worries.

"Dabbling in multiple business lines inhibits PayTM from being a category leader in any business except wallets, which are becoming inconsequential with the meteoric rise in UPI payments. In our view, competition and regulation will drive down unit economics and/or growth prospects in the medium term. Unless PayTM lends, it can’t make significant money by merely being a distributor," it said in a note.

"Longer term, take rates in the distribution business will be driven southwards by competition and regulation," it said.

"Key risks include change in regulations which allow monetisation of UPI and receipt of a banking license," it added in the report.