Paytm shares made a weak debut on Dalal Street on Thursday, opening on bourses at a discount of around nine percent. The weak listing of One97 Communications -- the parent of digital services platform Paytm -- comes after its mega initial public offer (IPO), though fully subscribed, failed to receive the kind of response enjoyed by several companies in the recent times.
Paytm's IPO is the biggest of all time in India, surpassing the likes of Coal India, Reliance Power and GIC. (A complete list of India's biggest IPOs)
But what to do with Paytm shares now?
For investors who got allotment in the IPO and those looking to enter afresh now, is it a good time to buy the One97 stock?
Macquarie initiated coverage on One97 with an 'underperform' rating and a target price of Rs 1,200. "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... Unless Paytm lends, it can’t make significant money by merely being a distributor," the brokerage said. (Read more on how Macquarie views Paytm shares)
Most analysts suggest only aggressive investors with a long-term view to hold Paytm shares now, and warn of some more downside up ahead.
Hemen Kapadia of KRChoksey Securities told CNBCTV18.com he prefers to stay away from Paytm shares. One97 Communications' loss-making businesses will find it hard to sustain premium valuations, he said.
The Paytm listing missed the expectations of Swastika Investmart Head of Research Santosh Meena, who had predicted the stock to open around the same level as the issue price. The company has a huge customer base with strong brand positioning and early mover advantage in digital payment services, however it is still a loss-making company and very aggressively priced, which is reflected in investors' tepid response to its IPO, he said.
"It is difficult to value such kind companies for time being... I would suggest only aggressive investors to hold this stock for the long term amid uncertainty," said Meena, who believes Bajaj Finserv is a much better way of playing the fintech theme with its proven track record and a better valuation comfort than Paytm.
To those who aimed for a listing gain in Paytm, Swastika's Meena suggests a stop loss below Rs 1,720, about 20 percent lower than the issue price.
Can those with a short-term perspective stay invested in Paytm shares now? Yes, said Rahul Sharma, Co-Founder of Equity99. "We might see some pullback but we don`t expect any momentum in the long term, so long-term investors may exit and wait for declines, and check the development roadmap in the coming days before adding it to the portfolio," he said.
Parth Nyati, Founder of Tradingo, believes there is no sign of Paytm turning profitable in the near future. Its weak listing was in tandem with estimates, said Nyati, who expects the stock to see some correction in the near term.
"Aggressive investors who got the allotment can hold Paytm shares with a long-term view, but those who applied for a listing gain can exit on a bounceback. New investors are advised to look for opportunities where other new-age companies can perform much better," he said.
Ravi Singh, Head of Research and Vice President of ShareIndia, advises investors to wait for Rs 1,600-1,700 levels in the Paytm stock for making a fresh entry. Retail investors may remain cautious as the overall market is in a profit booking zone, Singh added.