The company raised $2.5bn in the country’s biggest-ever initial public offering (IPO).
Some investors have voiced concerns about the loss-making Paytm’s business model.
The firm counts Chinese payments giant Ant and Japanese technology group SoftBank amongst its biggest backers.
Paytm’s first-day slump comes as Asia’s third-largest economy has been in a grip of an IPO frenzy as shares sit near record highs. India’s benchmark BSE Sensex index has risen by almost 25 percent since the start of this year.
India’s start-ups have attracted billions of dollars in funding this year as investors look for opportunities in the Covid-battered economy.
Even before Paytm’s record share listing, Indian companies had raised a record $10.5bn so far this year through IPOs in 2021.
Last week, shares in beauty retailer Nykaa jumped on its debut, while food delivery app Zomato surged on its first day of trade in July.
The soaring valuations of Indian IPOs have prompted authorities to take steps to try to cool the market.
On Tuesday, the country’s markets regulator outlined plans to tighten the rules on how companies can spend the cash they raise from IPOs.
That came after a decision by India’s central bank to impose limits on how much people can borrow to buy shares of a new listing.
Founded by Vijay Shekhar Sharma, who was once named as India’s youngest billionaire, Paytm’s platform was launched in 2010.
The company quickly became synonymous with digital transactions in a country that has traditionally been dominated by cash payments.
Paytm was given a major boost by Prime Minister Narendra Modi’s government push to curb the use of cash – including the demonetization of nearly all banknotes in circulation five years ago. It also benefitted as people became less willing to use physical cash during the pandemic.
Almost 22 million shop owners, taxi and rickshaw drivers, and other vendors in India now accept payments using the platform’s blue-and-white QR code stickers.
Last year the firm handled transactions worth more than $54bn for its 337 million customers.