Can Vijay Shekhar Sharma reinvent Paytm once again?
₹2,080-2,150 per share in November 2021—a stark evidence of the company’s long-term underperformance. At close of trading on Friday, 16 May, the share price of Paytm’s parent company, One 97 Communications Ltd, was ₹343.90 apiece. The stock price decline is bad enough, but the more important question is: can Paytm survive? Although Paytm’s brand remains popular with customers and merchants, the company is at risk of being stuck in a negative cycle of network effects.
Paytm has lost market share on the Unified Payments Interface platform for three successive months. It accounted for just 8.4% of UPI transactions in April, down from 11.8% in January. Paytm’s rivals PhonePe and Google Pay control more than 86% of the market.
Paytm’s trajectory is unsustainable. And competition is only intensifying, with firms including Walmart-owned Flipkart, Reliance group and Adani group—all of which have far greater resources than Paytm—expanding into payments. The revenue and margin hit from the payments bank closure will become clear only in the coming quarters, but Jefferies and other analysts estimate it will be substantial.
In particular, lending—which offers the fattest margins—may suffer. Yet to make a profit, Paytm can ill-afford restrictions on its ability to offer loans. Many of Paytm’s senior leaders have resigned since RBI moved against the firm.
Paytm’s chief operating officer and chief business officers were the latest to quit. The company claims that the exits were part of “a restructuring initiative, signalling a reinvigorated approach" under its founder and chief executive Vijay Shekhar Sharma. Still, the departures of so many leaders only adds to the growing suspicion that Paytm is being seen as a proverbial sinking
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