Berkshire, Softbank Paytm Bets Sour After Digital Payment Firm's Stock Rout

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 58% since the stock listed on Nov. 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 4.74 billion rupees ($63 million) in the July-to-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 rupees per share and for Ant Group it’s 330 rupees per share, declining to comment further on valuations. The stock closed at 903.05 rupees on Friday. 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.

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. Paytm provides digital loans, insurance, wealth management and stockbroking services.

(With assistance from Katherine Chiglinsky, Jun Luo and Filipe Pacheco.)

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor