Paytm Stock Down By 50% In 2024 Amid Regulatory Troubles

SUMMARY

On BSE, the fintech major’s stock has declined by 46.37% on a YTD basis while the stock’s worth has withered by more than 16% in the last three months

Paytm’s market capitalisation has plummeted by nearly 90% to $2.7 Bn currently, a far cry from $20 Bn at the time of IPO in late-2021

RBI’s curbs on the Paytm payments bank arm for alleged persistent non-compliances has seen losses zoom, which has led to major selloff by investors on the bourses

At the start of 2024, fintech juggernaut Paytm was looking like it had put the worst behind it. The allure of the stock was narrowing losses, soaring revenues, spree of new launches, and a healthy growth pipeline.

Brokerages were bullish on the fintech startup but then everything went sideways just a few weeks later. At the end of January 2024, the Reserve Bank of India (RBI) announced a slew of curbs on the company’s payments bank arm, and barred it from undertaking various accepting deposits, processing UPI payments and other services in the wake of persistent non-compliances and material supervisory concerns.

On BSE, the fintech major’s stock has declined by nearly half (46.37% to be precise) on a year-to-date (YTD) basis.

In the past three months, the stock’s worth has withered by more than 16% while Paytm’s share prices are down nearly 11% in the past one month.

This has left the stock’s battered. Painting a stark contrast is Paytm’s market cap, which has plummeted from $20 Bn at the time of its initial public offering (IPO) in late-2021 to $2.7 Bn currently. This translates to a decline of 90% in a matter of just two and a half years.

The RBI action triggered a domino effect which resulted in the southbound movement of Paytm’s stock. The fintech juggernaut’s losses more than tripled year-on-year (YoY) to INR 550.5 Cr in the fourth quarter (Q4) of the financial year 2023-24 (FY24). In contrast, Paytm was on a loss trimming spree and had clocked a mere INR 167.5 Cr in the year-ago period.

Not just this, Paytm’s revenue from operations also declined 2.9%, on a YoY basis, to INR 2,267.10 Cr in Q4 FY24 as against INR 2,334 Cr during the same period last year. Sequentially, operating revenue fell 20% during the period.

But, if there was a metric that aptly describes the impact of RBI’s crackdown, it is Paytm’s stock price. At the end of day’s trading on Friday (May 24), Paytm closed nearly 5% lower at INR 340.95 on the BSE.

Paytm’s Long Road To Recovery

For Paytm, it seems to be a long road to redemption. With cash cow Paytm Payments Bank more or less dead (its licence hasn’t been yet cancelled by the RBI) and top-level executives leaving in droves, the fintech major has many issues to resolve and chart a new path to sustainable growth and profitability.

Amid all this, things look grim for Paytm. The company was said to be considering firing around 5,000 to 6,300 employees, or 15-20% of its workforce, in the current fiscal year. On top of that, the company has also withdrawn its general insurance licence application.

With a streamlined focus on insurance, Paytm aims to save at least INR 950 Cr as it looks to cut down on cash burn and build new streams of revenues.

As troubles continue for Paytm, it remains to be seen how the fintech juggernaut finds a way out of the current mess. Despite the ongoing churn, cofounder and CEO Vijay Shekhar Sharma, last month said that he wants to make Paytm a market leader in Asia. Whether this optimism is well placed or misplaced, only time will tell.