One97 Communications had spent over 2 decades to build itself into one of India’s most valuable tech companies, but much of that effort appears to have been undone in 2 weeks.
Paytm has lost Rs. 26,000 crore of investor value since the Reserve Bank of India had ordered its payments bank to stop accepting deposits after 29th February. Paytm’s shares had closed at Rs. 761 per share on 31st January before the order, but have been tumbling since then. The stock now trades at just Rs. 340 a share, down 55 percent in 10 trading days. This has meant that Rs. 26,000 crore of investor wealth has been wiped out since RBI’s order.
The collapse in Paytm’s valuation means that the company is now valued at just $2.5 billion, 1/8th of the valuation it had commanded at its IPO. This is lower than the $3.4 billion Paytm had raised from investors before going public, which means that forget creating value, Paytm at this point is worth less than what investors had put into the company.
Paytm’s calamitous fall was brought about by an RBI order, which citied “persistent non-compliance” and “material supervisory concerns” at its payments bank, and essentially crippled Paytm Payments Bank’s operations. While RBI hasn’t gone into details of what these concerns were, it had been reported that Paytm Payments Bank had inadequate KYC mechanisms, which had caused more than a thousand accounts to be linked to the same PAN number. There had been speculation that these accounts were being used to illegally funnel money and evade money laundering laws.
But even as Paytm looked to smoothen things over with CEO Vijay Shekhar Sharma meeting with RBI officials and even Finance Minister Nirmala Sitharaman, that hadn’t seemed to help. RBI governor Shaktikanta Das categorically said that there would be no review of its order. “Let me be very clear that there is no review of the action taken against Paytm Payments Bank…when a decision is taken, it is taken after much consideration and deliberation. Decisions are not taken in a casual manner. They are taken in a serious manner,” he said.
And things might be going from bad to worse to Paytm. While there had been initial reports that the ED was likely to investigate Paytm which had been hotly denied by company, there are now reports that the ED has indeed initiated an enquiry against Paytm Payments Bank. “Investigative agencies including Enforcement Directorate (ED) have initiate preliminary inquiry to look into possible violations”, sources told CNBC. However, no formal case has been registered so far by any of the investigative agencies.
But the very indication of such investigations can be a death knell for companies in the financial sector. Fintech players handle their customers’ money, and require their users to place high degrees of trust in their integrity and services. But with Paytm Payments Bank’s operations all but over, and the spectre of investigating agencies hovering over it, Paytm now seems to be staring at the brink.