Why is Paytm stock falling?
Since its IPO, Paytm's market value has dropped by nearly
51%, resulting in a loss of approximately Rs 70,000 crore. When it went public
for the first time, the firm was valued at Rs 1.39 trillion (IPO). Vijay
Shekhar Sharma, the founder of Paytm, recently suggested at the India Digital
Summit that the firm should be measured against Bajaj Finance, a non-banking
financial services provider.
Sharma didn't specify the time period in issue, but
according to the most recent figures, Paytm outpaced by Bajaj Finance with
4.4 million loans disbursed in the December quarter. Bajaj Finance recorded 7.4
million loans.
Top 5 Reasons Why Paytm's Stock Price Is Falling
#1 Federal
Reserve's signals have had an impact.
The value of new age tech companies throughout the world has
been hurt by recent hints that the US Federal Reserve may hike interest rates
sooner than predicted.
The Fed's tightening and increased tapering are clearly
affecting high valuations. The most significant impact has been felt by some of
the new age, new tech enterprises in the United States and India.
During their IPOs, several new age firms wanted a
price-to-sales valuation of 40-70 times! Exorbitant values in some parts of the
market are anticipated to fall as major central banks across the world embark
on a rate hiking cycle.
#2 RBI norms
The Reserve Bank of India (RBI) has suggested digital
payments rules that might curb wallet costs. According to analysts, this sector
accounts for 70% of Paytm's income, and new limitations might have a
substantial impact. The company planned to start an insurance
business, but the Insurance Regulatory and Development Authority rejected its
proposal, potentially jeopardizing its chances of acquiring a banking
license.
#3 Resignations by top
management
Paytm recently announced the resignation of three top
executives. They were Abhishek Arun, Paytm Payments Bank's COO; Renu Satti,
offline payments COO; and Abhishek Gupta, Paytm Payments Bank's senior vice-president
and COO. Five prominent Paytm executives had quit before to the IPO. Amit
Nayyar, Paytm's president, Rohit Thakur, the company's chief human resources
official, and three other vice presidents had resigned.
Another source of concern for the corporation is senior
management attrition. Senior executives have been leaving Paytm, according to
the report, which is concerning and might have an impact on the company if the
present pace of attrition continues.
#4 Brokerages have
downgraded the stock and lowered the target price
Investor morale has been affected by recent downgrades by
foreign securities firms. Macquarie Research kept its underperform rating on
Paytm, but reduced its target price by 25% to Rs 900 from Rs 1,200 before. This
suggests a further drop of 28% from the present price. JM Financial assigned a
sell rating to the stock on November 27 and set a target price of Rs 1,240 per
share.
#5 Expensive
valuations
Paytm wanted a 47x price to sales at its IPO, but now trades
at 26x due to the stock price correction. A premium value was sought despite
strong competition in each of its business divisions and a lack of market
leadership in any of them. Analysts are concerned that long-term profitability
may be difficult to attain. According to analysts, most fin-tech companies
trade at a price-to-sales growth ratio of 0.3x-0.5x globally. The IPO generated
roughly Rs18,200 crore, making it the second-largest after Coal India's initial
public offering in 2010.