MF investors too feel the heat of the Paytm IPO

Suresh P Iyengar Mumbai | Updated on November 18, 2021

MFs have pumped ₹809 crore into IPO

The lacklustre debut of One 97 Communications (Paytm) has rattled many investors in mutual funds which have cumulatively pumped in ₹809 crore in the initial public offering. Among the major fund houses, Aditya Birla Sun Life AMC, HDFC Mutual Fund and Mirae Asset Mutual Fund have invested at the IPO stage.

Though the investment by mutual funds were relatively less compared to the issue size of ₹18,000 crore, investors have serious concern on the impact of the poor Paytm debut and its valuation.

On Thursday, the stock opened at ₹1,955 against the issue price of ₹2,150 a share. It plunged to a low of ₹1,564 and recovered to hit a high of ₹1,961. It finally closed at the lower end with loss of 27 per cent from the issue price.

Small share of portfolio

A Balasubramanian, Managing Director, Aditya Birla Sun Life AMC, said investors in mutual fund schemes which have exposure to Paytm should not be overly worried by the weak listing of the shares.

Also see: Paytm makes a weak debut, lists at 9% discount

In the overall portfolio of a scheme, the investment in Paytm will be very miniscule and investment in other shares will more than make up for mark-to-market loss in Paytm, he added.

Ability to disrupt

In a consumer-facing technology company, valuation is derived on the ability of the company to acquire customers and the disruption it can cause in the sector it operates, said an analyst.

Paytm narrowed its consolidated loss to ₹1,701 crore in the fiscal year ended March 2021 against a loss of ₹2,942 crore in FY20. Total income fell sharply to ₹3,187 crore against ₹3,541 crore.

For instance, Paytm has been making sharp inroad in FASTag for paying road toll and this segment generates huge free-float, he added.

Mutual funds have been active participants in the ongoing frenzy in the primary market and made a killing on listing gains.

Zomato listing

Fund houses had also invested in the Zomato IPO which was widely scoffed at for its rich valuations. They applied for 1.9 billion shares of Zomato, though institutional investors were offered around 389 million shares.

Also see: Paytm: No cashback, only cash gone!

On the day of listing, the food delivery firm made a bumper debut on bourses with the unicorn hitting the ₹1-lakh crore market capitalisation mark. The Zomato stock opened 53 per cent higher at at ₹116 on NSE against issue price of ₹76. The listing price on the BSE was at ₹115, up 51 per cent. The stock was trading at ₹154 on Thursday.

Similarly, in the IPO of Nykaa’s parent, mutual funds applied for 81.6 million of the 14.3 million shares on offer for qualified institutional

Published on November 18, 2021

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