(Bloomberg) — India’s largest digital-payments provider lost more than a quarter of its value in its first day of trading, marking one of the worst-ever debuts by a major technology company and casting a chill over a stock-market boom that had ranked among the world’s most frenzied.

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The plunge of 27.4% in One 97 Communications Ltd., operator of Paytm, surprised even some skeptics who had questioned the company’s valuation and path to profitability. Retail investors who piled into the offering are now sitting on heavy losses, alongside global money managers including BlackRock Inc. and the Canada Pension Plan Investment Board.

India’s biggest-ever IPO had been touted by some as a symbol of the country’s growing appeal as a destination for global capital, particularly for technology investors looking for alternatives to China. The question now looming over the $3.5 trillion stock market is whether the optimism that drove IPO fundraising and the benchmark S&P BSE Sensex to record highs has gone too far.

“This kind of a plunge, frankly, has come as a surprise considering the euphoria surrounding the primary market,” said Yasha Shah, head of equity research at Samco Securities Ltd.

Paytm shares sank to 1,560.8 rupees in Mumbai. That compared with the IPO price of 2,150 rupees, the top end of the marketed range. The Sensex dropped as much as 1%, among the largest declines in Asia.

Morgan Stanley, Goldman Sachs Group Inc., Axis Capital, ICICI Securities, JPMorgan Chase & Co., Citigroup Inc. and HDFC Bank Ltd. were the bookrunning lead managers for the sale.

The payments provider’s IPO has become one of the most disappointing major tech industry debuts of all time. Its fall rivals Deliveroo Plc’s plunge of as much as 31% to rank among the sector’s worst day-one slumps in percentage terms since Telstra Corp.’s first-time share sale in 1997.

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Retail Euphoria

Paytm raised about $2.5 billion in the IPO, with individual investors bidding for nearly twice the number of shares that were available.

Nikhil Kamath, co-founder of Zerodha Broking Ltd., the country’s largest brokerage, wasn’t so much surprised by the correction in Paytm as he was with the froth visible in the number of recent first-time share sales that have been oversubscribed.

“There has been a euphoria around IPOs in India, supported by the bull run in stocks, and people got carried away by it,” Kamath said. “For Paytm, the runway for their profitability is too long and doesn’t justify the far-fetched pricing.”

Institutional players are more savvy than retail, who are bearing the brunt of the losses, Kamath said. While there’s no denying that Indian startups have created incredible businesses, they shouldn’t be valued too richly, he added.

“There should be a middle ground where pricing should be more favorable to the retail investors,” he said.

Long Haul

In an interview with Bloomberg News minutes after shares sank at the open, Paytm founder and chief executive officer Vijay Shekhar Sharma said the slump “is no indicator of the value of our company.”

“We are in it for the long haul,” he said. “We’ll put our heads down and execute.”

Sharma founded Paytm two decades ago and pioneered digital payments in a predominantly cash-transacting country of 1.3 billion people. The name, short for Pay Through Mobile, rhymes with ATM.

“There’s never a right moment, a correct share price and an accurate valuation,” Sharma said. “We are at the starting point and investors will get to know us in the coming quarters, years and decades.”

Ahead of the listing, Macquarie Capital Securities (India) Ltd. initiated coverage on the company with an underperform rating and a price target of 1,200 rupees, implying an over 40% downside from the issue price.

“We believe Paytm’s business model lacks focus and direction,” analysts Suresh Ganapathy and Param Subramanian wrote in the report. “Unless Paytm lends, it can’t make significant money by merely being a distributor. We therefore question its ability to achieve scale with profitability.”

The market debut of Paytm, backed by Berkshire Hathaway Inc., SoftBank Group Corp. and Ant Group Co., comes in a standout year for India’s internet startups.

The number of so-called unicorns in the country has doubled and public markets have witnessed strong listing performances of many, including food-delivery service Zomato Ltd., beauty retailer Nykaa’s parent FSN E-Commerce Ventures Ltd. and PB Fintech Ltd., operator of online insurance marketplace Policybazaar.

IPOs in the South Asian nation have raised about $15 billion so far this year, already an annual record by total proceeds. Companies that started trading in 2021 rose by an average of 23% in their first session, according to data compiled by Bloomberg as of Nov. 15.

(Updates with shares and other detail throughout.)

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