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Shareholders of Paytm (NS:), owned by One97 Communications Limited are having a tough time. Paytm share price tanked by 1.89% on Tuesday, 4% on Wednesday and over 10% in today’s session on a continually increasing volume. The stock has consistently been falling since its listing as every rise has been sold by investors. There was a time when the stock seemed to be bottoming out around INR 520 and it delivered a good rally from there, reaching a high of INR 844 but now it looks like the stock is all set to break its 52-week low.
So what has suddenly gone wrong with an already beaten-down stock? This is the very same story that happened with Zomato (NS:) after which Zomato’s shares fell over 10% on two consecutive days in July 2022. The companies which do not have promotor holdings in their shareholding pattern, their pre-IPO investors are required to hold the company’s shares for 1 year after the listing.
This rule restricts them to sell their shares but allows them to exit after one year. As the lock-in period of PayTm shares got over, one of the biggest shareholders SoftBank pulled the trigger to exit. SoftBank has been reported to sell a decent stake of 4.5% via a block deal which is clearly evident in the reported volume figures by the exchange. By 2:34 PM IST, a total of 52.35 million shares have exchanged hands so far, which is definitely not a retail-level volume.
This is the highest one-day volume for the stock since its listing and is up by a gigantic 4,000% from the 10-day average volume of 1.26 million shares. This clearly indicates that institutions backing PayTm are on a selling spree today and I won’t be surprised if some other funds have liquidated their stake.
PayTm’s performance is probably one of the reasons for the massive value destruction for shareholders. The company has not reported a single year of profit after FY14 and cumulative loss since then till FY22 stands at a massive ~INR 15,390 crores! The market share of the company has also gone down from 17.3% to 14.67%, in the last 5 years. Although it is also to be noted that the revenue has consistently been growing with a record revenue of INR 5,626.4 crores in FY22, still the company is struggling to become net profitable, even at the EBITDA level.
The daily and weekly chart of PayTm shares is looking really weak. As long as the stock starts to hover above the falling trendline which connects the peaks marked on 8 August 2022 and 10 October 2022, no upward bias should be established.
Some mutual funds that are holding PayTm shares in their portfolio are Mirae Asset Focused Fund, AB Sun Life Frontline Equity Fund etc.
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