Key Question: Why does an enterprise need to pass the Test of Self-explain-ability ?
The IPO of One97 Communications, the parent company of Paytm, was open for subscription from 8 to 10 November. The Rs 18,300 crore IPO was the largest in the country’s corporate history.
However, the issue received a lukewarm response from investors, being subscribed 1.89 times in total. Furthermore, the shares opened on the Bombay Stock Exchange (BSE) at a discount of 9 percent from its issue price of Rs 2,150. The shares later fell by 27.25 percent to Rs 1,564.
1st Why Question: Why did share values fall by 9 percent on the opening day of listing on BSE?
In Paytm’s case, the retail portion was barely oversubscribed, but worse, the HNIs hardly bought the stock at all. So, those who were looking to sell out their IPO allocation on listing day didn’t find buyers. The stock price fell.
When it comes to retail investors or investors who had bid for shares up to Rs 2 lakh, the oversubscription was 1.66 times. This means, for every 100 shares on offer, investors bid for 166 shares. For non-institutional investors, which primarily includes high net-worth individuals (HNIs), or essentially individuals who bid for shares worth more than Rs 2 lakh in an IPO, the issue was subscribed just 0.24 times. This means that for every 100 shares on offer, these investors bid for only 24 shares.
2nd Why Question: Why did HNIs find paytm shares unattractive?
Probably the investors don’t know what the company really stands for. Or, what exactly is its business model? Or, as Vijay Shekar Sharma, Paytm’s founder, told CNBC-TV18 after the stock’s listing: “People will take time to understand the business model.”
Key Answer: Every enterprise needs to pass the Test of self-explain-ability. This is to ensure that potential investors, customers understand the products, services, business models of the corporate enterprise or business unit. This test can also apply to individuals to attract the attention of potential employers and hence enable them to understand the strengths, expertise of an individual.
What can you do today or this week to increase your self-explain-ability score?
(Source: Vivek Kaul DH Nov 20,2021)
Read more at: https://www.deccanherald.com/opinion/what-paytm-s-listing-flop-show-tells-us-about-ipo-success-stories-1052924.html