Paytm Struggles Continue as Shares Fall 8.5% to Record Low

Business View
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Paytm Struggles Continue as Shares Fall 8.5% to Record Low

Paytm Share Price Cracks 8.5%

Over the last few days, Paytm has been facing numerous challenges. Now there is a new addition in their struggle which is not a sign of recovery. According to the reports, on Tuesday, 13th February 2024, the shares of one 97 communications-owned company fell 8.5 per cent to a record low of 386.25 rupees. Brokerage Macquarie is responsible for the downfall of Paytm’s share. The company released a statement stating that the firm is currently facing a “serious risk of the exodus of customers” after the Reserve Bank of India orders came against Paytm Payment Bank Ltd (PBBL). 

The statement further added that “The fintech company is facing a serious risk which significantly jeopardises its monetisation and business model.” It estimated a 60–65% fall in revenues from lower payments and distribution revenues, increasing loss forecasts by 170% over FY25 and 40% over FY26. Apart from this, the company also lowered the rating on the stock to “underperform” while intensely cutting the target price to approx Rs. 275 from Rs 650. It is worth noting that around 33 crore people are using Paytm, and 11 crore people are doing monthly transactions. 

The company states “We assume a 50 per cent cash burn rate and 20x P/E multiple to normalised earnings from the distribution business.” 

Noteworthy, that RBI has earlier released an order against Paytm bank to halt any financial activities including accepting deposits or top-ups in any customer accounts, FASTags, prepaid instruments, wallets, and more after the end of February 2024. According to the reports, on the BSE, the stock of Paytm reached 7.50 per cent at Rs 390.90 respectively. While on NSE, the shares of One97 Communications fell 7.28 per cent at the amount of Rs 391.45 per respectively. At the time of the intra-day trade, One97 Communications reached its 12 months of Rs 385.60 on the National Stock Exchange of India Ltd and Rs 385.75 on the Bombay Stock Exchange. 

In contrast, the NSE Nifty gained 0.56 per cent to 21,737.75 points, while the 30-share BSE Sensex benchmark increased 436.83 points, or 0.61 per cent, to 71,509.32. Furthermore, RBI Guv Das stated on Monday, 12th Feb 2024 that the central bank of India is not against any fintech company and its policy but the main objective of the order is to protect the interest of users and depositors. While talking about the orders against the Paytm Bank, Mr. Das stated that the orders which the central bank of India took against Paytm were due to a violation of the guidelines shared by the RBI. He added that charges against any regulated institutions are taken whenever it finds that they do not take any action even after they are directed to follow the rules. 

Moreover, the fintech company has been in talks with other banks to transition its nodal accounts for FasTag, waller, NCMC and other works. It’s a relief to hear that Axis and HDFC are continuing to work with Paytm in numerous ways but they are awaiting regulatory go-ahead prior to taking action on any new business initiatives.

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