What happened with Paytm on market listing day?

The stock market debut of Paytm was met with a slump on Thursday, as the shares of its parent company, One97 Communications Limited plummeted sharply on the day of the debut.

Paytm, one of India's largest digital payment companies, failed to impress on the day of its stock market debut, with its shares dropping 27%. Paytm's IPO, which was the country's largest-ever in corporate history, suffered the worst drop on a listing day, according to statistics from IPOs of companies with issue sizes above Rs 1,000 crore in the previous 15 years.

This comes after Vijay Shekhar Sharma, the founder of Paytm, was spotted crying while he spoke to the BSE on Thursday. "People ask me how I raise money at such high costs," he told "and I just tell them that I never raise money on the price, I raise money on purpose."

What happened, exactly?

Paytm's stock had dropped by 27.25 percent. The issue price was Rs 2,150, but by the time the markets closed, it had dropped to Rs 1,564.

When markets opened on Thursday, the stock was listed at Rs 1,955 on the Bombay Stock Exchange (BSE), with a 9 percent discount. On the National Stock Exchange of India, the firm was listed at Rs 1,950 and closed at Rs 1,560. This was a decrease of 27.44% from the IPO price.

Paytm was India's largest initial public offering (IPO), raising Rs 18,300 crore from investors on November 8th.

Sharma, on the other hand, said he was unconcerned about his company losing a quarter of its value. "I've never felt more eager, positive, and enthusiastic about the future," he said. The downturn has nothing to do with our company's worth."

Even as Paytm prepared to enter the market, analysts were concerned because the company is making losses. Paytm suffered losses of Rs 1,701 crore in the previous fiscal year.

Prior to Paytm, the parent company of Cafe Coffee Day, Coffee Day Enterprises, had its shares drop the most (17.6% from its issue price) on its listing day in November 2015. Reliance Power, which is owned by the Anil Dhirubhai Ambani Group, began its stock market adventure in 2008 with a 17.2 percent drop from its issue price.

Everyone, including investors and regulators, can learn from this. Any investment requires accurate valuations, so don't be fooled by the excitement and frenzy. Since market regulator SEBI now allows loss-making firms to enter the market, rather than only those with a three-year profit track record, a pre-IPO valuation study for companies should become the standard.