Paytm share nosedives 10% on Softbank stake sale buzz

Shares of Paytm parent, One97 Communications, dropped 10% in opening trade on the Bombay Stock Exchange on Thursday amid a report that Japan-based SoftBank is planning to offload stock in the fintech company as the lock-in period for pre-IPO investors ended this week. SoftBank Group, one of the biggest shareholders in One97 Communications, is looking to sell 29 million shares in the company at ₹555 to ₹601.45 apiece, at a discount of up to 7.6% to Wednesday’s closing price. The Japanese venture fund, which made a total investment of around $1.6 billion in Paytm, has taken out $220-250 million by paring its stake in the company in its IPO last November.

Weighed down by the development, Paytm share price opened sharply lower by 6.4% at ₹563.25 on the BSE, while the BSE benchmark Sensex dropped 26 points to 61,954 levels. Extending opening losses, the largecap stock declined as much as 10% to hit a low of ₹541.3, driven by strong volume trade. There was a surge in selling activities as 28 lakh shares changed hands over the counter on the BSE, compared with the two-week average volume of 1.24 lakh stocks.

The stock remained under stress as investors turned jittery after the one-year mandatory lock-in period for pre-IPO shareholders expired on November 16.  Following the expiry of the lock-in period, the pre-IPO investors such as Warren Buffet's Berkshire Hathaway, Billionaire Jack Ma-led Alibaba Group, SoftBank, and Elevation Capital are free to liquidate their holding in the company.

Paytm, one of the worst performing initial public offerings (IPOs), has wiped off 72% of investors' wealth since its listing on November 18, 2021. In the country's second largest-ever IPO, the company had raised ₹18,300 crore via public listing of shares at an issue price of ₹2,150.

As per the data available on the BSE, Paytm shares hit its all-time high of ₹1,961.05 on its listing day on November 18, 2021, while it touched a record low of ₹511 on April 5, 2022. The stock currently trades more than 72% lower than its IPO issue price of ₹2,150.

In the last one year, Paytm shares have delivered a negative return of 65% to its shareholders, while it has fallen over 7% in the past six months. In the calendar year 2022, the largecap stock has lost 59%, while it tumbled over 19% in a month.

Last week, One97 Communications reported second quarter earnings, which showed that its consolidated net loss widened to ₹571 crore in the quarter ended September 30, 2021, as against ₹472 crore in the same period last year. The company posted a loss of ₹644 crore in the June quarter of 2022.

Revenue from operations rose 76% to ₹1,914 crore as against ₹1,086 crore in the same period last year. On a sequential basis, revenue climbed 14% from ₹1,679 crore in Q1 FY23. The growth in revenue was driven by accelerated device deployments, and momentum in commerce and cloud and growth in Paytm’s advertising, resumption of ticketing volumes, credit cards, and PAI cloud, as per the company. 

Segment-wise, revenue from payment services to consumers business grew 55% YoY at ₹549 crore whereas the revenue from payment services to merchants surged 56% YoY at ₹624 crore. The company’s net payment margin surged 15% QoQ at ₹443 crore, led by monetisation and improvement in payment processing charges. 

Revenue from financial services, which accounts for 18% of its total revenue, zoomed 293% YoY to ₹349 crore, driven by strong sourcing and collection business.