Paytm Shares: A Reduced Churn Indicates Lower Volatility
The churn in Paytm’s parent One 97 Communications Ltd. shares has reduced after the first two days of plunge, indicating reduced volatility. At least, for now.
The shares tumbled 35% in the first two sessions, making it the worst market debut after completing India’s largest initial public offering. But Paytm shares rose 10% on the third trading day on apparent buying interest from bargain hunters. The stock was up over 15% on Wednesday, the fourth session after listing.
By the end of Day Three, about a third of the free float, or shares available for trading, had changed hands. And the churn fell each day. That suggests trading normalised by Tuesday after those who suffered losses on buying in the IPO exited.
Of One97 Communications’ 64.82 crore outstanding shares, only 8.2% is freely available to trade and the rest are locked in.
The anchor portion of Paytm’s IPO comprised 41.78% of the gross issue and is locked in till Dec. 14.
The pre-IPO shareholding is locked in for a year—till Nov. 14, 2022—according to SEBI guidelines. What that means is pre-IPO investors, including anyone who bought in the over-the-counter market before the listing, can’t sell for the next one year even though they may have purchased the shares at almost twice the current market price.
In the first two days, 5.19 crore Paytm shares were traded on both the stock exchanges NSE and BSE. That’s about 97.4% of the free float available in the market.
Shares marked for delivery in the first two trading sessions were high because investors who participated in the IPO hoping for a listing day surge may have exited as the stock tumbled below the issue price.
Bulk of trades came from investors, brokers selling the shares and buying at a lower price, booking profit intra-day.
In all, 1.74 crore shares were delivered in the first two days. That fell to about 28 lakh by Day Three.
According to the delivery statistics available on the exchanges:
On the first day, more than 40% of the shares traded on both the exchanges were delivered.
After the long weekend when the stock plunged again on the second trading day, the percentage of delivery was 24-26%.
That further came down to 20% on the third day, in line with the market-wide average delivery range.
Investors who sought delivery of shares on the listing day would have received delivery Tuesday. The session's trading pattern indicates normalised buying and selling for Paytm, with gross delivery for clients falling to 24.6% on the BSE and 19.8% on the NSE.
Despite the rebound on Tuesday, the upside for Paytm’s stock may be restricted in the near term. Analysts at Macquarie Capital Securities (India) Pvt., who were vindicated as the stock fell after their ‘underperform’ rating, still find the stock expensive.
Moreover, 3.83 crore shares will come into the market after the anchor lock-in period expires next month. They bought the stock at the upper end of the IPO price band a day before the issue.