Paytm, once the hottest of India’s startups, has seen a stunning fall on the stock market this week, extending a plunge that has wiped 77% off its value since it went public in the country’s biggest IPO in 2021.
Shares of the hugely popular digital payments company have crashed by the daily maximum allowed in Mumbai for two days in a row, even though India’s stock markets have been touching new all-time highs. Paytm is down 36% since Wednesday’s close of trading and almost 25% this year.
The company has struggled since its disastrous market debut in November 2021, when it failed to convince investors that it could become profitable in the face of growing competition from homegrown rivals and American tech firms.
It also landed in hot water with regulators — two years ago, the central bank barred its banking arm from signing up new customers.
Paytm stock is now trading at just 487 rupees (around $6) a share. The crash over the past two days has wiped out $2 billion in market capitalization alone, leaving the company worth just $3.7 billion.
The latest plunge came after India’s central bank cracked down further on its business.
The Reserve bank of India (RBI) on Wednesday ordered Paytm Payments Bank to stop taking deposits, along with other key services, citing “persistent non-compliances.”
Since the notice, which caught India’s tech community by surprise, Paytm has swung into fire-fighting mode to try to calm investors and its 300 million-plus customers.
But both its assurance that it is taking “immediate steps” to comply with the regulators, and a conference call held after market hours on Thursday, have failed to stop the meltdown.
The RBI order is a “reputational risk to the overall Paytm business and casts doubt over the visibility of [its] business performance in future,” said Manish Chowdhury, head of research at brokerage StoxBox.
Paytm launched its payments bank in 2017 as a joint venture with founder Vijay Shekhar Sharma. At that time, it could accept deposits but not lend money to customers.
In the Thursday call, Sharma said the central bank’s action “is more of a speed bump,” and that going forward Paytm will work only with other banks.
Paytm’s app became a household name in the country in 2016, when Indian Prime Minister Narendra Modi suddenly banned the country’s two biggest currency notes — around 86% of the country’s cash at the time — with the aim of cracking down on tax evasion and illegal wealth.
The move was hugely disruptive for the economy, but it helped Paytm grow at an explosive rate: The company signed 10 million new users within a month. It made us “a folklore name in this country,” Sharma told CNN in 2019.
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