The shares of One97 Communications, the parent company of Paytm, experienced a significant downturn in Wednesday's trading session, plummeting by 5% to reach an unprecedented low of Rs 317.4. This decline occurred amidst escalating apprehensions surrounding the company's lending endeavors and its collaborative ventures with crucial financial institutions.
According to reports from The Economic Times, Aditya Birla Finance, a pivotal lending partner for Paytm, has purportedly invoked loan guarantees provided by the fintech firm due to defaults in repayments from customers. Additionally, other financial collaborators such as Piramal Finance and Clix Capital have opted to discontinue their associations with Paytm, as detailed in the report.
The resignation of Paytm's President and COO, Bhavesh Gupta, earlier in the month, citing personal reasons, further added to the tumult. Gupta will transition to an advisory capacity until the year's end, supporting Paytm's growth endeavors.
Sources have indicated that Aditya Birla Finance might have invoked guarantees totaling hundreds of crores of rupees, significantly impacting Paytm's financial standing, particularly in light of the broader regulatory challenges confronting the sector.
"Aditya Birla Finance could have possibly invoked a large sum amounting to hundreds of crores of rupees â€æ This will have a severe impact on the company’s financials amid a wider clampdown by the central bank on the sector," the report quoted one of the individuals familiar with the matter.
Despite displaying growth in disbursals over the past year, with Rs 15,535 crore of loans disbursed in the December quarter alone (a 56% increase from the previous year), Paytm's financial services revenue accounted for only 21% of its total operational revenue in that period.
Under RBI's digital lending guidelines, unregulated entities like Paytm are permitted to offer up to 5% default loss guarantee (DLG) cover to their non-banking finance partners.
Paytm extended similar protection to Aditya Birla Finance, utilizing collection commitments for unpaid loans sourced through its platform.
A Paytm spokesperson refuted speculation about the company's lending operations, asserting that they have resumed lending services with select partners and are in discussions to expand with others.
"We categorically reject all speculations concerning our lending business. We have resumed lending services with a select few partners and are actively engaged in discussions to expand with the remaining lending partners. Paytm does not provide a First Loss Default Guarantee (FLDG) to lenders; our role is strictly that of a distributor," the spokesperson told ET.
The year-to-date decline in Paytm's stock stands at nearly 51%, with a sharp 65% drop over the last six months, reflecting broader concerns among investors about the company's financial stability.
Shares of One97 Communications hit the lower circuit to end at Rs 317.15.
