Paytm is India’s one of the leading fintech company which is continuing its vicious cycle with its stock price gaining a new all-time low of 317.15. This is the 10th repeated day of losses for the company, resulting in nearly 19% of its value in the past two weeks.
One of the major concerns is the company’s lending business, which appears to be facing significant challenges.
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Loan Guarantee Woes and Partnership Breakdowns
According to reports, a key lending partner, Aditya Birla Finance, has issued loan guarantees to Paytm due to customer defaults. This could potentially result in hundreds of crores of rupees being lost for Paytm. Moreover, other granting partners such as Piramal Finance and Clix Capital have ceased their partnership with the company. These developments are supplemented by a decrease in unsecured consumer lending and increased regulatory scrutiny from the Reserve Bank of India (RBI).
Paytm denies any issues with its lending business. The company claims it only operates as a distributor and does not provide First Loss Default Guarantees (FLDGs) to lenders.
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Leadership Departures and Declining Market Share
Exacerbating the corporation’s disinclination are recent conspicuous exits. Bhavesh Gupta, the President and COO of Paytm, resigned merely twelve months following his accession, alluding to personal circumstances. Concurrently, Surinder Chawla, the CEO and Managing Director of Paytm Payments Bank, vacated the post in April.
Moreover, the market participation of Paytm within the Unified Payments Interface (UPI) milieu has undergone diminishment. The company’s percentage stake dwindled to 8.4% in April, marking a regression from the antecedent 10.8% recorded in February and March correspondingly. This dwindling can plausibly be ascribed to the regulatory restrictions imposed by the Reserve Bank of India (RBI) on Paytm Payments Bank earlier in the present year.
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Investor Concerns and Declining Market Cap
The contemporary valuation of shares depicts a substantial markdown of 85.25% in relation to the primary public offering price of INR 2,150 for Paytm. Such a depreciation has dealt a substantial setback to stakeholders, particularly those engaged in the inaugural public offering.
A noteworthy decline is also observed in the organization’s market capitalization, now standing at a nominal INR 20,164 crore.
SoftBank, a prominent shareholder, has drastically reduced its interest in Paytm, resulting in concerns regarding the future curves of the company. Although there has been an boost in involvement from individual investors, the ability of this in counterbalancing the declining confidence of institutional investors remains uncertain.
About Author
This Article has been written by Ms Sayani Mondal, who is a Defense and security enthusiast with interest in geopolitical analysis and cyber threats. She is skilled researcher with a passion for applying academic knowledge to real-world national security challenges.
