When the Institutions Said Yes and the Market Said No

The Hook

Institutions said yes. The market said no. But neither statement meant quite what most investors thought it meant.

In November 2021, One97 Communications — Paytm's parent — raised ₹18,300 crore in what was, at the time, India's largest-ever IPO, at an issue price of ₹2,150 per share. Paytm did not meet the conventional profitability-track-record eligibility conditions, and therefore accessed the public market under Regulation 6(2), which required at least 75% of the net offer to be allotted to Qualified Institutional Buyers. Paytm's QIB portion was fully subscribed.

The stock closed listing day roughly 27% below its issue price.

What the IPO Established — and What It Left Unanswered

The Narrative

But institutional participation is not the same thing as institutional endorsement of long-term fair value. A fully subscribed QIB portion tells us that sufficient institutional demand existed at the issue price to meet the regulatory allocation requirement. It does not, by itself, establish that those institutions regarded ₹2,150 a share — implying a valuation of roughly ₹1.39 lakh crore for a company with no annual profit — as fair value over the long term. Anchor allocations in high-demand IPOs carry their own dynamics: access, relationship value, momentum positioning. None of those are the same as an independent conclusion on price.

What followed was a multi-year drawdown, not a single bad day. It took until Q1 FY26 — almost four years after listing — for One97 Communications to report its first profitable quarter: ₹123 crore, against a ₹839 crore loss a year earlier, as revenue growth and operating leverage improved. That momentum has since built: ₹183 crore in Q4 FY26, and ₹220 crore in Q1 FY27 on revenue up 22% year-on-year.

The business has since delivered profitability that was still only prospective at the time of the IPO. But that does not mean every investor who participated was underwriting the same thesis, or held to the same time horizon. Anyone who bought on listing day expecting the QIB signal to mean the price was settled sat through years of drawdown to see the fundamentals catch up — and many did not hold long enough to see it.

What a QIB allocation tells you — and what it doesn't

A QIB allocation tells you: there was sufficient institutional demand at the offer price; the issue satisfied the applicable eligibility condition; and institutional investors were willing to participate at that price on that day.

It does not tell you: that the business is fairly valued; that profitability will arrive within any particular period; that the issue price reflects intrinsic value; that every QIB shares the same investment horizon; that institutions will hold the position after listing; or that the wider market will agree with the price once trading opens.

The Lesson

A QIB allocation clears a specific regulatory bar — it brings institutional capital into an issue involving a business without a conventional profit track record. It doesn't settle the price.

That distinction matters more, not less, as loss-making growth companies increasingly access public markets. The investor's task remains the same: understand the economics, the path to profitability, and — above all — what expectations are already embedded in the issue price.

The price was therefore being justified by expectations of future earnings, not today's profits. The investor's real job was to decide how much of that future was already priced into ₹2,150 a share.

— Mahesh Ramanujam, FCA, DISA(ICAI) · R. Mahesh & Associates, Chennai