Paytm Share Price: The shares of Paytm have lost nearly 51% from the issue price so far and its market capitalization has eroded by over Rs 70,000 crore. At the initial public offer (IPO), Paytm was valued at around Rs 1.39 lakh crore.
At the recent India Digital Summit, Paytm founder Vijay Shekhar Sharma said that the company should be benchmarked against non-banking financial services firm Bajaj Finance. Paytm CEO Vijay Shekhar Sharma said on the television channel, “In this quarter, we are expecting $100 million revenue from payments alone, which is… big revenue. People underestimate the size of payment revenue. ” He further added, “Credit has been the highest revenue and profitable financial service. Bajaj Finance has been in the industry for 30-32 years. Paytm processes more loans than Bajaj today, that too in less than three years. “
According to Moneycontrol, the figures reported by Sharma could not be immediately confirmed as the final data released by Paytm for the December quarter shows that the company lags behind Bajaj Finance in terms of loan disbursement. While Bajaj Finance disbursed 74 lakh loans during the December quarter, Paytm had disbursed 44 lakh during the December quarter.
However, despite all these reasons, the stock of Paytm continues to fall. The 5 main reasons for the fall in the shares of Paytm are given below-
1. Expensive Valuation
Paytm demanded 47 times the price-to-sales value during its IPO and is currently trading at 26 times the stock price correction. Paytm had demanded such high valuations despite strong competition across all its business segments and not being a market leader in any segment.
Shares of Paytm touched a new low, the issue price has fallen by 51.5% so far, know the reason
Analysts worry that profits for the company could be far-fetched for a long time. He also says that globally most fintech companies trade at 0.3-0.5 times their sales growth ratio. Let us tell you that Paytm had brought an IPO of Rs 18,200 crore, which is the biggest IPO in the country till date.
2. Impact of Federal Reserve Signals
The US Federal Reserve recently indicated that it may raise interest rates earlier than expected. This signal from the Fed has affected the valuations of new age tech companies around the world. Aditya Kondavar, Chief Operating Officer, JST Investments, said, “The tightening and increased tapering of the Fed Reserves is definitely having an impact on higher valuations. The biggest impact has come on some of the new age tech companies in the US and India.”
For example, US tech investment firm ‘ARK ETF’ has lost 50% in the last one year and 30% in the last two years. Kondavar added, “Some new age companies have demanded 40-70 times price-to-sales value during their IPOs. It is expected that when major central banks around the world start raising their interest rates, then In many markets, companies with higher valuations will lose value.”
3. Rules issued by RBI
According to reports, the Reserve Bank of India (RBI) has proposed a regulation on digital payments, which may impose a cap on wallet charges. Analysts say this segment accounts for 70 per cent of Paytm’s revenue. In such a situation, any rule regarding this can have a big impact on Paytm. The company wanted to enter the insurance business, but its proposal was rejected by the insurance regulator IRDAI. Analysts say this has also impacted Paytm’s prospects of getting a banking license in the future.
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4. Resignation from top management
Three senior Paytm executives have resigned recently. These include Abhishek Arun, Chief Operating Officer (COO) of Paytm Payments Bank, Renu Satti, COO of Offline Payments, Senior Vice-President and COO Abhishek Gupta of the company. Apart from this, even before the launch of Paytm’s IPO, 5 senior executives of the company had resigned.
An analyst on the condition of anonymity said, “The departure of people from the senior management team is also a cause for concern. Is.”
5. Reduction of target price by brokerage
Recently, several foreign securities firms have reduced the target price of Paytm. This has also affected the sentiments of the investors. Macquarie Research has reduced the target price by 25 per cent to Rs 900 from Rs 1,200 earlier, while retaining the ‘underperform’ rating for Paytm. This means that there has been another drop of 28% from its current price. At the same time, JM Financial has also given a sell rating to Paytm on November 27 and has given a target price of Rs 1,240 for it.
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