PAYTM FALLS FOR 10TH DAY IN A ROW TO HIT NEW ALL-TIME LOW, LONGEST LOSING STREAK SINCE LISTING; WHAT'S BEHIND THE CRASH?

The sell-off in Paytm shares, which commenced in early February, appears to be continuing, as the stock hit a new all-time low of ₹317.15 apiece in today's session as it was locked in the 5% lower circuit limit. The stock's previous all-time low of ₹318 was recorded in mid-February. 

Today's downturn in One 97 Communications marks the 10th consecutive session of losses for the stock, which was the longest losing streak since listing in November 2021. During this period, the stock has fallen from ₹391.35 apiece to today's closing price of ₹317, translating into a drop of nearly 19%. 

Also Read: These 300 stocks fall over 10% from their 52-week highs. Time to be cautious?

Aditya Birla Finance, a significant lending partner for the company, is reported to have exercised loan guarantees provided by the fintech firm. This action follows repayment defaults from customers, as per sources familiar with the matter, cited by The Economic Times.

Additionally, Piramal Finance and Clix Capital have terminated their partnerships with Paytm, indicating challenges in the company's lending business. These decisions come in the wake of the central bank's ban on Paytm Payments Bank and a broader slowdown in unsecured consumer lending, as reported by the same sources.

Also Read: Paytm's share in UPI market declines to 9% in March, lowest in last 4 years

One source familiar with the matter told ET that Aditya Birla Finance may have invoked a substantial sum, potentially amounting to hundreds of crores of rupees. This development is expected to significantly impact the company's financials, especially amidst increased regulatory scrutiny from the central bank in the sector.

In response to ET's inquiries, a spokesperson from Paytm said, "We categorically reject all speculations concerning our lending business. We have resumed lending services with a select few partners and are actively engaged in discussions to expand with the remaining lending partners. Paytm does not provide a First Loss Default Guarantee (FLDG) to lenders; our role is strictly that of a distributor."

Also Read: Paytm: Two more top executives depart amid restructuring efforts

Another factor that is dragging the stock lower is the company's announcement over the weekend regarding the resignation of its President and Chief Operating Officer, Bhavesh Gupta. According to the company, Gupta's resignation, occurring just a year after his appointment, is attributed to personal reasons. 

This marks the second high-profile resignation within a month, following the departure of Surinder Chawla, Chief Executive Officer and Managing Director of Paytm Payments Bank, on April 9th.

UPI transaction volume down 

Adding to the challenges is the decline in the company's Unified Payments Interface (UPI) transactions for the third consecutive month in April.

In April, the company processed 1,117.13 million transactions, marking a 9% month-on-month decrease from the 1,230.04 million transactions handled in March. 

Consequently, the company's market share in the UPI ecosystem has contracted, Business Standard reported on Tuesday, citing data from the National Payments Corporation of India (NPCI).

Also Read: India recorded about 131 billion UPI transactions in FY24, says FM

In April, the company held an 8.4% market share in the UPI applications’ ecosystem, down from 10.8% and 9.13% in February and March, respectively. Despite this decline, the company remains the third largest player in the ecosystem, as other players are considerably smaller in comparison to the fintech major, the report said. 

The decline in UPI transaction volume began after the RBI imposed restrictions on Paytm Payments Bank.

Also Read: Paytm completes merchant migration to new UPI ids

Down 85% from IPO price 

With the stock's current closing price of ₹317.15 per share, it is trading at an 85.25% discount compared to its issue price of ₹2,150 per share. This presents challenges for investors who participated in the initial public offering and have held onto their positions. The company's current market capitalisation is ₹20,164 crore.

Meanwhile, SoftBank entity SVF India Holdings significantly reduced its stake in the company from 6.46% in Q3 FY24 to 1.40% in the March quarter (Q4 FY24). 

 

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before making any investment decisions.

2024-05-08T11:52:22Z dg43tfdfdgfd