Paytm's Stock Drops By More Than 20% In A Week

Paytm's stock dropped over 11 per cent after Macquarie's report anticipated that the Noida-based payments firm from the billionaire Mukesh Ambani's Jio Financial Service was a potential risk for the fintech giant.

Shares of One97 Communications, Paytm's parent company, fell to Rs 475.55 on the National Stock Exchange (NSE).

Ambani said in a statement, “JFS will be a technology-led business, delivering financial products digitally by leveraging the nation-wide omni-channel presence of Reliance’s consumer businesses."

Reliance Group has a network of more than 15,000 stores across several formats (supermarkets, digital stores, etc.) and a vast customer base of more than 400 million in telecom and 200 million in retail. "This will pose a major challenge for Paytm, as the markets expect aggressive pricing by Jio to counter Paytm in the same business segments ahead," said, Avinash Gorakshakar, Head Research, Profitmart Securities.

Reliance Industries said last month that it will demerge the financial services platform and list it separately as a different business on the stock exchanges under Jio Financial Services. With the demerger, the fintech giant intends to tap the growing demand for new-age financial services for retail and small-business customers.

Gorakshakar further explained that with a large customer base at Jio Telecom and retail JIO of over 50 crore customers, financial institutions can compete with banks on unsecured lending, which has been growing at a faster pace in general and forms around 10-15 per cent of the loan book of private sector banks.

According to the report, Jio Financial Services will be able to better cater to consumers than the other fintech players in the market due to its access to massive amounts of data gathered from non-financial relationships. With the help of data from arms, it can process and analyse the data in real-time and offer financial services similar to those offered by larger corporations such as Alibaba, Amazon, Apple, Facebook, and Google.

Jio Financial Services could easily leverage RIL's large balance sheet, resources, NBFC license, and network. Banking veteran K. V. Kamath led the fintech firm. He added, "Paytm has a highly elevated cost structure in terms of high employee costs and other large overheads, which may make it tough for it to compete with Jio. However, the real action will be seen only after Jio officially enters the market soon. The stock has also reacted negatively because of huge selling by pre-IPO investors recently, which has resulted in the Paytm stock moving down sharply."

Paytm's stock has dropped nearly 22 per cent since last Wednesday, when the lock-in period expired, allowing for a sell-off. The company’s stock has plunged more than 75 per cent from its listing price of Rs 1950 on the NSE when it stepped onto the public exchange last year in November.