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Paytm (Downfall in Share Price)

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Vaibhav Bamrara
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82 views3 pages

Paytm (Downfall in Share Price)

Uploaded by

Vaibhav Bamrara
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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About Paytm……….

Established in 2010, Paytm (Pay through mobile) is a largest platform of mobile payments and
e-commerce in India. One 97 Communications is its parent organization. The company started
its business with online bill payments and prepaid mobile recharge but nowadays it has become
a marketplace for customers.
In 2014, the organization launched a Paytm Wallet that became the mobile payment service
platform in India. In November 2016, there are more than 150 million users who are using this
service. The Paytm wallet becomes a boon at the time of demonetization where a large number
of users used this feature. In 2015, Paytm expanded its business by adding some new features
like air, taxis and bus tickets booking and also booking of movie tickets. In a very short time
period, there are 164 million registered users and more than 90 million monthly transactions
Head Quarters:
Noida, Uttar Pradesh, India
Key People:
Chief Executive Officer – Vijay Shekhar Sharma
Logo:
The logo of the firm contains the name of the company in two shades of blue color.
Net Revenue:
Undisclosed by the company
Total Number of Employees
more than 5000 employees
Official Website:
www.paytm.com

About paytm bank…….


Paytm Payments Bank (PPBL) is an Indian payments bank that offers digital banking
services. PPBL was founded in 2017 and is headquartered in Noida.
PPBL's services include:
Savings accounts
Current accounts
Fixed deposits with partner banks
UPI, India's real-time payment system
FASTag, India's electronic toll collection system
Paytm Wallet
PPBL's services have the following features:
No minimum balance requirement
Free digital transactions
2% interest per annum payable monthly on money deposited in the Savings Account
Up to 7.50% per annum interest can be earned on using the Fixed Deposit facility
PPBL only invests deposits in government bonds and does not convert deposits into
risky assets.
PPBL is associated with One97 Communications Limited (OCL), with 49% of the paid-up
share capital held by OCL. Vijay Shekhar Sharma, the founder of One97
Communications, owns a 51% stake in the bank.

Reason for downfall in the share price of paytm…..


Expensive valuation
Paytm demanded a 47x price to sales during its IPO and currently trades at 26x because of the
correction in its stock price. The high valuation was sought despite the stiff competition in each
of its business segments without market leadership in any one of them. Analysts are worried
that profitability may be elusive for a long time. Analysts say globally most fintech players trade
around 0.3x-0.5x price to sales growth ratio. The IPO raised around Rs18,200 crore, biggest
after Coal India's 2010 initial share sale.

Impact of Federal Reserve's signals


Recent indications that the US Federal Reserve may increase interest rates earlier than had
been foreseen have impaired the valuations of new age/tech companies across the globe.
"Fed tightening and increased tapering are definitely playing out on high valuations. The biggest
effect has come on some of the new age, new tech companies in the US and also in India" said
Aditya Kondawar, chief operating officer of JST Investments.
ARK ETF in the US, for example, has fallen close to 50% in the past one year and 30% in the
last two months.
"Some new age companies demanded a price to sales valuation of 40-70 times during their
IPOs! It is expected that as major central banks across the globe go on a rate hike cycle,
exorbitant valuations in some pockets of the market are expected to cool down", Kondawar
added.

Expected RBI norms


According to reports, the Reserve Bank of India (RBI) has proposed digital payments
regulations that could cap wallet charges. Analysts say this space accounts for 70% of Paytm's
revenue and any regulations may impact it significantly. The company wanted to start insurance
operations, but its proposal was rejected by the Insurance Regulatory and Development
Authority, a development that analysts say could impact its prospects of getting a banking
license.
Top management resignations
Three senior officials executives have recently resigned from Paytm. They were Abhishek Arun,
chief operating officer (COO) of Paytm Payments Bank; Renu Satti, COO, offline payments; and
Abhishek Gupta, senior vice-president and COO. Five senior Paytm executives had quit ahead
of its IPO. Amit Nayyar, Paytm president, Rohit Thakur, chief human resources officer, and
three other vice-presidents resigned from their posts.
"Senior management attrition is another cause of concern for the firm. The report highlights
senior executives have been resigning from Paytm which is a cause of concern and could
impact the business if the current rate of attrition continues," an analyst said on condition of
anonymity.

Downgrades and cut in target price by brokerages


Recent downgrades by foreign securities firms have dampened sentiment among investors.
Macquarie Research retained its underperform rating, but cut its target price by 25 percent on
Paytm to Rs 900 from Rs 1,200 earlier. This implies another downside of 28% from its current
price. JM Financial also initiated a sell rating on 27 November and given a target price of Rs
1,240 a share.

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