The tumultuous journey of One97 Communications, the parent company of Paytm, reached a new low as its shares plummeted by 5% to touch an unprecedented Rs 317.4 in Wednesday’s trading session. This significant decline underscores mounting apprehensions surrounding Paytm’s lending business and its crucial partnerships with financial institutions.
Lending Partnerships Under Scrutiny:
Amidst the downturn, reports emerged of Aditya Birla Finance invoking loan guarantees provided by Paytm due to repayment defaults from customers. This move, coupled with decisions by other key partners like Piramal Finance and Clix Capital to discontinue their collaborations with Paytm, paints a grim picture for the fintech giant.
Leadership Resignation and Financial Implications:
Adding to the woes, Paytm’s President and COO, Bhavesh Gupta, tendered his resignation citing personal reasons. This departure comes at a critical juncture, exacerbating concerns over the company’s financial stability. Sources indicate that Aditya Birla Finance may have invoked guarantees amounting to hundreds of crores of rupees, further straining Paytm’s financial position amidst regulatory challenges in the sector.
Challenges in Lending Services:
Despite showcasing growth in loan disbursals, with a significant increase of 56% in the December quarter alone, Paytm’s financial services revenue remains relatively modest, comprising only 21% of its total operational revenue during that period. Regulatory guidelines limit unregulated entities like Paytm to offer up to 5% default loss guarantee cover to their non-banking finance partners, highlighting the constraints faced by the company.
Company Response and Investor Concerns:
In response to the speculations, a Paytm spokesperson denied any setbacks in its lending operations, asserting that they have resumed services with select partners and are exploring opportunities with others. However, the staggering year-to-date decline of nearly 51% in Paytm’s stock, coupled with a sharp 65% drop over the last six months, reflects broader apprehensions among investors regarding the company’s financial viability.
As Paytm grapples with the fallout from its lending business and the exodus of key partners, it faces a critical juncture in its trajectory. The road ahead is fraught with challenges, requiring decisive action and strategic planning to restore investor confidence and ensure its long-term sustainability in the competitive fintech landscape.