Challenges faced by One97 Communications (PayTM)

Shreya_Anaokar Shreya Anaokar

Last Updated: 13th March 2023 - 12:58 pm

Listen icon

Globally, Fintechs have corrected sharply. The price to sales growth ratio (PSG) of Fintech companies is declined to 0.07x-0.35x globally. 

Challenges with the lending license: 

To gain scale and size, Fintechs need to go beyond distribution and lending for which they require licenses. With the RBI recently raising issues with PayTM payments bank and Chinese investors’ stake being more than 25% in the company, the probability of PayTM getting a banking license seems to be lower, which will stop its ability to lend. Given this, and competition from other Fintechs in the payments space, it will be difficult for PayTM to generate free cash flow for a longer period.

The regulations on digital payments and BNPL by RBI, stricter KYC, and compliance norms will not be favorable for the development of fintech companies in general, and will potentially bring down unit economics and growth, which will impede PayTM’s growth and profitability.


Valuations: 

The crucial challenge while valuing Fintechs or new-age companies is their negative earnings and Free Cash Flow (FCF). Hence multiples are based on sales numbers – the level of subjectivity here can be very high. Hence, multiples for such companies can correct very sharply. 

The company continues to gain market across payment verticals and there has been a steady improvement in contribution margins. Contribution profit is defined as revenue from operations less variable costs.

The management of the Company said that it has clarified that the RBI’s recent restrictions are on account of IT and KYC-related issues and not due to data access or localization concerns.
 

Trade with 0* brokerage for 30 days
Open FREE Demat Account with endless opportunities.
  • Flat ₹20 Brokerage
  • Next-gen Trading
  • Advance Charting
  • Actionable Ideas
+91
''
 
By proceeding, you agree to our T&Cs*
Mobile No. belongs to
hero_form

Market Outlook Related Articles

Market Outlook for 06th December 2024

by Sachin Gupta 18th Dec 2024

Market Outlook for 16 July 2024

by Ruchit Jain 13th Sep 2024

Market Outlook for 15 July 2024

by Ruchit Jain 11th Oct 2024

Market Outlook for 12 July 2024

by Ruchit Jain 12th Jul 2024

Market Outlook for 11 July 2024

by Sachin Gupta 11th Jul 2024

Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing. For detailed disclaimer please Click here.

Open Free Demat Account

Be a part of 5paisa community - The first listed discount broker of India.

+91

By proceeding, you agree to all T&C*

footer_form