Even Paytm doesn't know why its share prices are falling consistently

On March 22, 2022, the Bombay Stock Exchange (BSE) asked Paytm for clarification on why its share prices are falling. On March 23, Paytm replied, saying that they also do not know why the share prices are dipping.  

SO WHAT HAPPENED?

On March 22, the Bombay Stock Exchange (BSE) sought a clarification from One97 Communications (Paytm's official company name) asking it to disclose to the market any information that may be causing this significant negative movement in share prices.

On March 23, Paytm issued a response to the BSE. As per Paytm, they have no information on what's causing this movement in prices. According to them, their business fundamentals are strong and remain the same as previously declared on February 4, 2022 (when their earnings report was released).

WHY WAS PAYTM ASKED TO CLARIFY? 

When the Paytm IPO came up in November 2021, the hype surrounding it was HUGE. It was touted to be one of India's largest IPOs and a lot of people were betting on it to make money. But at the same time, there were an equal number of people who had their doubts regarding Paytm's growth via the IPO.

WHAT WERE THE DOUBTS?

1. It was a loss-making company 

2. It had insanely high valuations

3. The business model was confusing

4. It had a lot of competitors 

THE TUMBLING PRICE HISTORY  

Before the Paytm IPO launch, the issue price agreed by the company was Rs 2,150. But when the IPO launched, the price fell to Rs 1,560. In the last few months, the price has been consistently falling and looks something like this: 

In the last 5 days, the prices have specifically reached an all time low and have fallen like this: 

MESSING WITH REGULATIONS   

Though Paytm is a loss-making company, its profits come from two businesses- Paytm Fastag and Paytm Payment Banks. Since Paytm Fastag has a 28% market share, its profit has increased over the years from Rs 29 Crore (FY 2020) to Rs 37 Crore (FY 2021). 

But it seems like Paytm Payment Banks is messing around with RBI regulations which is why the RBI is imposing bans around onboarding new customers.

Paytm Payments Bank received its license in 2016 and started its operations in 2017. In 2018, for the first time, RBI banned Paytm from onboarding new customers because of KYC lapses. But Paytm resolved it and thus the RBI ban was removed in 6 months.

But in 2022, RBI has again imposed a similar ban from onboarding new customers which is yet to be lifted. 

The falling prices have made stock market experts advice investors to stay away from the stock for some time, till it reaches and sustains a price point of at least Rs 800.    

So as of now, we will have to wait and watch for Paytm's shares to move up.