Image copyright Getty Images Image caption Paytm holds over 160 million users, but is now forced to explore strategic options
Paytm, a key player in the Indian mobile payment industry, has stumbled in its first day of trading.
The firm’s stock was halted for almost three hours after falling 10%.
Several investors urged caution in the run-up to the initial public offering in India, where the government announced a ban on old high-value banknotes last November.
The money raised in the IPO – about $1.4bn (£1bn) – will be ploughed back into a new Indian start-up.
“There’s going to be a lot of noise around today’s announcement,” said Dipesh Dipu, a partner at consulting firm Ernst & Young.
“A lot of people are going to jump on the bandwagon, buying the issue and hoping that it goes up. Some of them are going to make mistakes.”
India’s cashless era
An alliance of Indian companies has invested more than $3bn in the Indian app since its launch six years ago, promising a seamless payments and e-commerce platform that takes payments from the user rather than the merchant, and will only accept payment in the local currency.
The move aims to replace the reliance of cash-based transactions on cash and says it will help India boost tax revenues, promote more e-commerce transactions and crack down on cash in the economy.
But a lack of checks and balances for e-commerce providers poses “serious” security concerns, said Pramod Bhasin, the former head of SAP India.
India’s low penetration of credit and debit cards, coupled with a bank transfer restriction of 15 days when an account is empty, means it has been less of a boon than expected.
The government has said its goal is not to replace cash but boost the use of digital payments as part of its vision of the country becoming a cashless economy by 2020.
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Image caption The company is looking to become a “one-stop shop” for its users
With $150bn in payments volume last year, Paytm already has more than 160 million users, but now it is forced to explore strategic options.
It is considering a sale of a minority stake in its e-commerce business or a potential partnership with another firm.
While Digital India has been an election slogan for the ruling Bharatiya Janata Party (BJP), its BJP leader, Prime Minister Narendra Modi, denied having an agenda to convert India into a cashless economy.
“We are committed to facilitating better banking and digital financial services for all Indians, regardless of their economic conditions,” he told the parliament in late November.
While the owner of Paytm, China’s Ant Financial, does not want to sell its majority stake, it is seeking a non-binding commitment from the government that it will continue to have a significant shareholding after the flotation.