Paytm: India’s largest-ever IPO seen as a ‘high-risk bet’ for investors

Paytm: India’s largest-ever IPO seen as a ‘high-risk bet’ for investors

Investing in Indian company could prove to be a “very high-risk bet” and might not see a sizable jump when it lists on stock exchanges, a fund manager said on Tuesday.

“In Paytm’s case, where there is the strength of the network effects — it’s the largest digital payments from a merchant’s perspective — it has a long runway to capitalise on that and hopefully generate some profits along the way,” Rakhi Prasad, an investment manager with Alder Capital told Bloomberg TV’s Haslinda Amin and Rishaad Salamat.

“These are very high risk bets” she added, over the medium- to long-term horizon. “Nothing is really going to happen in the short-term. I would say demand will come through but maybe not a big listing pop that we may have been seeing in some other companies.”

ALSO READ: Paytm can grow its value going forward, says Softbank’s Masayoshi Son

The Ant Group-backed company’s $2.5 billion offering, which opened Monday, is the biggest initial share sale in India and will close on Nov. 10 with the price range set between Rs 2,080 ($28.147) and Rs 2,150 per share. It has drawn a strong response from anchor like BlackRock Inc. and the Abu Dhabi Investment Authority.

While the company, whose name rhymes with ATM, faces stiff competition from Alphabet Inc.’s GooglePay and Walmart-backed PhonePe, it has the largest share of India’s merchant payments market. According to GlobalData, the Indian mobile payments market will be worth more than $2 trillion by 2024.

Paytm’s initial public offer comes at a time when the world’s second-most populous nation has seen a spurt of technology unicorns listing recently, with the stock rallying to record highs. Food delivery startup Zomato and beauty startup Nykaa’s initial public offerings were fully subscribed on the first day, pointing to immense retail investor interest in the space.

–With assistance from Anand Menon.

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