Berkshire, SoftBank early Paytm bets turn sour after stock rout
MUMBAI: The collapse in the shares of Paytm following India’s largest initial public offering is proving an expensive lesson for the firm’s early backers.
Paytm shares have tumbled about 57% since the stock listed on November 18. That’s cut the valuation of its parent One 97 Communications Ltd. to $7.8 billion from $20 billion.
SoftBank Group Corp.’s 2017 investment valued the Indian company at about $7 billion, according to people familiar with the matter. Berkshire Hathaway Inc. invested in One 97 when the company was valued at more than $10 billion in 2018, and T. Rowe Price Group Inc. invested at a $16 billion valuation the following year, the people said.
Paytm is struggling to convince investors and analysts alike of the potential for the digital payment giant’s business model. Losses widened to ₹474 crore ($63 million) in the Julyto-September quarter from a year ago amid rising expenses. The plunge in its shares amid a global equity selloff has also cast a shadow over the prospects for technology firms preparing to go public in the Indian market. More than 40% of firms that sold shares for the first time in India last year are under water.
A representative for Paytm said by email that the effective cost of SoftBank’s 17.47% stake in the company is ₹800 per share and for Ant Group it’s ₹330 per share, declining to comment further on valuations. Jack Ma’s Ant is the biggest shareholder with a 25% stake.
SoftBank and T. Rowe Price declined to comment, while representatives at Berkshire Hathaway and Ant didn’t respond to requests for comment.
Shares in Paytm were trading up 1.4% at 3:08 pm in Mumbai, in line with the broader Sensex Index that was also 1.4% higher.
Paytm raised $2.5 billion in its IPO, which was priced at the top of a marketed range. Its debut was one of the worst by a major technology firm since the dot-com bubble era of the late 1990s. Pre-IPO investors have a one-year lock-in that expires in November, according to its offer document.