Shares of One97 Communications Ltd., the parent company of digital payments firm Paytm, have plunged nearly 80% from their peak following a much-hyped but disastrous initial public offering in November 2021, wiping out over $7 billion in market capitalization. This week alone, over $2.4 billion in value was erased after the Reserve Bank of India ordered Paytm Payments Bank to halt the onboarding of new customers, citing “persistent non-compliance with regulatory requirements.”
The latest directive compounds problems for a company that has struggled to convince investors of its profitability potential in an increasingly competitive digital payments landscape. From once being crowned India’s startup darling after pioneering QR code-based payments in the wake of Narendra Modi’s 2016 demonetization drive, Paytm has nosedived from its $20 billion valuation amidst regulatory scrutiny over its business practices and doubts being cast over its path to profitability.
Founder Vijay Shekhar Sharma called the RBI action a “speed bump” and claimed Paytm Payments Bank can continue operations with partner banks, but the reputational risk and loss of direct access to customers deal a further blow. It caps a stunning fall from grace for the payments startup that at one time looked poised to lead India’s technology revolution. The decline in fortunes for what was formerly India’s most valuable startup raises questions about frothy valuations as investors turn sceptical of loss-making digital companies.
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