Why Paytm Share Price is Falling

For the past year, Paytm has been making headlines for various reasons.

Chief among them was the sharp drop in the share price of Paytm.

The company's shares have been under pressure since the IPO (Initial Public Offers) debuted in November 2021. The market value of the company has eroded by Rs 1 tn since it got listed on the bourses.

This was due to a series of events, including the RBI prohibiting new client onboarding and its high valuation.

The decline further deepened due to the Russia-Ukraine war and the general sell off in the market earlier this year.

Paytm shares further fell another 5% today. (Paytm shares continues to fall even today but for different reasons)

So, what are the reasons for the further decline?

Let's take a look...

#1 Re-appointment of CEO

Institutional Investor Advisory Services (IIAS), during the annual meeting, raised concerns on the re-appointment of the CEO (Chief Executive Officer) and the proposed remuneration for the CEO.

IIAS is a proxy advisory firm. The firm opposed the reappointment of Vijay Shekhar Sharma as the CEO.

IIAS' rationale has to do with several commitments made by the CEO to make the company profitable, which have not played out.

Also, the remuneration of the CEO was higher than that of the CEOs of S&P BSE Sensex companies.

This led to a panic sell-off of the shares in the market, dragging the stock lower.

#2 Disappointing quarterly results

For the June 2022 quarter, Paytm's revenue rose by 88.5% YoY (year on year) to Rs 16.8 bn.

The revenue growth was due to the increase in number of transactions and adoption of high-margin businesses.

However, the net loss of the company widened due to an increase in the marketing expense and employee benefits.

The net loss increased YoY to Rs 6.4 bn from Rs 3.8 bn from the same quarter the previous year.

#3 New-age stocks facing sell-off

The looming wave of inflation and the corresponding increase in interest rates have raised concerns about the business model of start-ups.

Earlier capital to fund losses was cheap, and available. Now that's history.

Companies need to become profitable fast.

This has especially intensified the pressure on the fintech stocks who hitherto did not care about profits.

How Paytm shares have performed recently

Over the week, the shares are trading down more than 2.5%.

The stock is also down over 40% in 2022.

Paytm shares touched a 52-week high of Rs 1,955 on 11 November 2021 and a 52 -week low of Rs 510 on 12 May 2022.

The stocks currently trades at PBV (Price to Book Value) of 2.9.

About Paytm

Paytm is India's leading financial services company that offers payments and financial solutions to consumers.

It's an owned subsidiary of One97 Communications Limited. It is an Indian-based mobile internet company.

Paytm is a digital and mobile commerce platform. Its business offerings include mobile payments and mobile marketing. The company's segments include Paytm, Commerce, Cloud, and others.

Paytm became India's biggest investment platform within its first year and is now one of the largest contributors to the new Systematic Investment Plans (SIPs).

New-age tech companies such as Paytm have profits awaiting them in long run. But at present, they are burning cash.

For more details about the company, you can have a look at Paytm's factsheet and quarterly result.

Also check out the below video where Co-head of research at Equitymaster, Rahul Shah analyses Zomato and Paytm and says which is a better buy.

You can also compare Paytm with its peers.

Paytm vs Policy Bazaar

Paytm vs Zomato

Paytm vs Nykaa

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...