Paytm’s debacle casts doubt over IPOs for Indian startups

INDIA’S EQUITY MARKETS HAD BEEN ON A TEAR, BUOYED BY A CENTRAL BANK THAT SLASHED INTEREST RATES TO A RECORD LOW.

MUMBAI: A stunning two-day plunge by India’s Paytm after its initial public offering casts a shadow over the prospects for technology firms preparing to go public in what was supposed to be the country’s breakout year.

At least some of the IPO prospects that have been “on the periphery” and looking to benefit from the flood of transactions may now rethink the timing and pricing of their issues, according to Edelweiss Financial Services Ltd.

Payment services firm MobiKwik may delay its IPO by a few months due to lack of demand from investors and a 30%-40% drop in valuation, the Economic Times reported Tuesday citing sources it didn’t identify.

The Paytm debacle has dimmed the mood in India’s stock market with its benchmark S&P BSE Sensex Index poised to drop five sessions in a row, which would be the longest losing streak since March. While Paytm’s shares rebounded by as much as 6.5% in early Tuesday trading, the broader gauge continued to fall further.

Retail investors, who bought an unprecedented amount of shares in Paytm’s parent One 97 Communications Ltd., saw more than 30% of their value wiped out since the payment firm’s listing on Thursday.

Further losses may be in store if the stock slumps from its Monday closing price of ₹1,359.6 to the ₹1,200 predicted by Macquarie Group Ltd.

“The event in a way will nudge people to be cautious and not take the market for granted by blindly placing bets,” said Gopal Agrawal, managing director and co-head of investment banking at Edelweiss Financial Services. “It is important that a company’s story and prospects are well understood by the investors.”

India’s equity markets had been on a tear this year, buoyed by a central bank that slashed interest rates to a record low and millions of new individual investors seeking higher returns in riskier assets. The rally has encouraged at least half-adozen tech startups to seek to public listings, including SoftBank Group Corp. backed Oyo Hotels and Delhivery Pvt.