Top 2 reasons behind the Paytm share price fall; RBI ban on paytm; paytm payments bank; What investors should do ?

On 31st January RBI banned Paytm payment Bank from conducting transactions after 29th if you’re a Paytm user who uses Paytm wallet to make payments on the purchase of any product recharge your phone or make bill payments then you can’t use Paytm wallet after 29 February you can still continue to use the Paytm app but you won’t be able to add money or accept payment in your Paytm wallet.

This is a major blow in Paytm business that resulted in two back-to-back lower Circuit of 20% each and today 10 % lower circuit resulting in a more than 40% fall in Paytm share price in the last three trading days basically pm has lost a market cap of nearly 20,000 CR in just 3 days.

So in the last 1 month share price has fallen by 54%

Paytm Share price chart (1 Month)

What is wrong with Paytm?

Why has RBI Banned Paytm Payments Bank?

Why is the Paytm share price falling?

The actual reason behind Paytm’s share price fall

February 29 now RBI mentioned that their audit report exposed multiple compliances

Reasons behind paytm share price fall

1) Issue with the KYC– The first biggest issue with KYC is knowing your customer now when you open a bank account KYC is the most important aspect where you take all the required information about the customer to ensure that the bank account is not used for illegal or terrorist activities that’s where PayTm failed to do proper KYC for their customer.

2) Pan card issue -PayTm Open lacks of account without any proper KYC also there were many cases where a single pan was used to open multiple bank accounts

Now in my opinion this is a serious breach of compliance & this one is a serious corporate governance issue with the PayTm.

Corporate governance is the most important aspect while investing in a company this corporate governance issue was also clearly visible when they came up with their IPO at an exorbitant price of 2150 rupee with a market cap of 1.4 lakh cr

Where the Chinese investors and other institutional investors got a very good exit and Retail investors got trapped since the share price fell more than 75% from those IPO levels

On the contrary look at Tata Technologies, which launched their IPO at 500 rupees at a very attractive valuation with a market cap of about 20,000 CR they got rewarded big time with a 140% premium on the listing day because they were not greedy and is a big factor that distinguishes good leadership from bad.

Traders body CAIT on Sunday issued a cautionary advisory to traders to Switch from Paytm payments bank to another payment option for business-related transactions. Following RBI curbs on Paytm, wallet, and bank operations.

Most number of small traders, vendors, hawkers, and women are making payments through Paytm, and as such RBI restriction on Paytm could lead to financial disruption for these people as per the CAIT

Revenue Mix of Paytm

Product Wise Breakup

• Payment & Financial Services– It contributes around 82% of the revenue breakup & since RBI has announced the ban on payments bank. Since main revenue stream of Paytm comes from financial services they have introduce any new payment partner in order to continue with the present situation.
• Commerce &  Cloud Services– This segment generates revenue of around 18%, which is really low & will not contribute much in the longer run.

Loan Breakup

• Postpaid Loans- 55.6 %
• Personal Loans- 24.2 %
• Merchants Loans – 20.2 %

Source- https://www.tijorifinance.com/company/one97-communications-ltd/#revenuemix

Fundamentals of Paytm

Market Cap	20750 Cr.
Current Price	327
High/Low	998/308
Stock PE	-12.23
Book Value	196
ROCE	-13.5
ROE	-13.9
Sales Growth 5 years	15.10%
Debt To Equity	0.02

Shareholding Pattern

Change in Shareholding Pattern

	Mar-22	Dec-23	Change in shareholding pattern
Promoters	0.00%	0.00%	0.00%
FIIs	4.42%	63.72%	59.30%
DIIs	1.07%	6.07%	5.00%
Public	94.51%	30.22%	-64.29%

Paytm’s Revenue & Net Profit

What investors should do about it?

If we look at the company is revenue and net profit for the last five years, we can see that the revenue is increasing, since the company’s inception they are still bearing the losses and in Jan 2024 company reported a loss of 1113 crores.

So I haven’t invested in such kind of loss-making businesses as the future for Paytm seems like Yes Bank so be careful before investing in such companies.

Disclaimer- 

This article is a complete guide about Paytm company. These information and forecasts are based on our analysis, research, company fundamentals and history, experiences, and various technical analyses. 

Also, We have talked in detail about the share’s prospects and growth potential. Hopefully, this information will help you in your further investment. If you have any further queries, please comment below.

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