The Paytm listing debacle has sparked concern from investors and entrepreneurs, fearful that it could derail a string of expected Indian flotations that were supposed to cement the country's status as a leading destination for tech start-ups after the US and China, Financial Times reported.
The debacle has put the spotlight on Paytm, its shareholders SoftBank and Alibaba, and bookrunners on the IPO including Goldman Sachs, Morgan Stanley and Citigroup.
"The worry for all of us is does this impact the broader India tech sentiment? One bad deal and one instance of bad judgment can upset the apple cart," said the head of equity capital markets for India at one western bank.
"Valuation is going to be very difficult."
Other firms delay IPO
MobiKwik, an Indian fintech company, has delayed its IPO originally scheduled for November, saying this week that it will "list at the right time", the report said.
Ashneer Grover, the co-founder of fintech BharatPe, said Paytm had "spoiled" the Indian market.
Sandeep Murthy, a partner at investment group Lightbox in Mumbai, said there may be "some period of cooling off" in fintech listings until early next year but argued that it was "natural", Financial Times reported.
Indian tech companies have raised a record $5 billion through listings this year, according to Dealogic, about 10 times last year's total.
Paytm's core business does not make money and a move to cut marketing expenses indicated it was trying to show a better bottom line before listing, said Prashant Gokhale, the Hong Kong-based co-founder of research group Aletheia Capital."There was a lot of hype with SoftBank and Warren Buffett there," he said, the report added.
Too much liquidity chasing deals
One person with direct knowledge of the discussions Paytm had over the IPO pricing said there was too much liquidity chasing deals, especially with the crackdown in China having made India more attractive as a destination.
"Investors are desperate for places to go, which pushed up prices without fundamentals improving," the person said. "A lot of money chasing that deal that didn't get it is probably happy now," the report said.
Paytm's large Chinese ownership also poses a regulatory and reputational risk, after India placed strict curbs on Chinese investment following military tensions last year. While Alibaba and its financial arm Ant sold shares in the IPO, together they still own nearly a third of the company, Financial Times reported.
Some argue Paytm's painful debut may ultimately prove a blessing if it prompts investors to look at other richly valued and much-hyped Indian tech companies with some scepticism. "What was at least encouraging for me (was) seeing that the market was not in a state of irrational exuberance," Lightbox's Murthy said of the company's debut.
"If a market were blindly valuing things, that would (be) a bigger challenge in the future," the report said.