The stock listed at Rs 1,950, a discount of 9.3% to its offer price of Rs 2,150, and closed at Rs 1,564.15, down 27%. This is the first of six recent startup IPOs to list below the offer price. Anil Ambani-controlled Reliance Power had plunged 21% on debut in February 2008 after an Rs 11,700 crore IPO.
Investors lost nearly Rs 5,000 crore of their Rs 18,300 crore investment in the One97 IPO. While institutional investors lost Rs 4,254 crore, retail investors’ net loss amounted to Rs 567 crore. High net worth induvial investors lost Rs 166 crore.
At the closing price,
One97 commanded a market capitalisation of Rs 1.01 lakh crore ($13.3 billion), less than the $16 billion valuation at which the company raised around $1 billion in November 2019. Recently listed Zomato commanded a market capitalisation of Rs 1.22 lakh crore on Thursday.
“Both IPO price and the listed price were decided by the investors and not by the companies, unlike private rounds,” said One97 founder and CEO Vijay Shekhar Sharma. “We fundamentally believe that payments-led financial services is an incredible opportunity in India. That is what we are committed to and will remain committed to in the foreseeable long-term future.”
Brokerage Macquarie initiated coverage of One97 on Thursday with an underperform rating and set a target of Rs 1,200, 44% below the IPO price of Rs 2,150. The business model lacks focus and direction, it said, while calling it a “cash guzzler.” Macquarie said achieving scale with profitability is a big challenge and that regulations and competition are added worries.
Other poor debuts following IPOs exceeding Rs 1,000 crore include Café Coffee Day in November 2018, which dropped 18%, while ICICI Securities fell 14% in April 2018.
One97’s opening contrasts with those of other startups.
PB Fintech, parent of digital insurance marketplace Policybazaar, and beauty ecommerce platform Nykaa’s parent company FSN E-Commerce Ventures, made their debuts in November, listing at premiums to their IPO prices. Nykaa
opened November 10 with a 77.87% premium over the issue price.
Analysts who questioned the One97 business model and lack of profit along with lofty valuations were expecting the stock to list at a discount of 5-10%.
“Investors with a longer-term view can continue to hold the stock, whereas short-term investors may exit the stock,” said Vikas Jain, analyst, Reliance Securities. “The tepid subscription figures dented morale, and the listing too has been on the weaker side, which may lead to some more correction in the stock.”
One97’s Rs 18,300 crore IPO scraped through on the final day of bidding on November 10 with the help of foreign institutional and domestic retail investors.
Nearly 80% of the bidding came from foreign institutional investors, while 16% came from local retail investors. HNIs bid for just 2.5 million shares, 2.77% of the total demand, while corporate, domestic institutional bidding was just half a percent.
One97’s losses narrowed to Rs1,701 crore in FY21 from Rs 4,230.9 crore in FY19. At the offer price, the issue was valued at 21.3 times FY21 price to book value and 49.7 times FY21 price to sales.