Paytm's shares plummet amid mounting losses and regulatory hurdles

Shares of India's Paytm have emerged as one of the worst performers globally, ahead of earnings release likely to indicate growing losses for the troubled payments network.

Paytm's stock has fallen by over 61 per cent in the last six months, ranking second in Bloomberg's World Index, which tracks large and mid-cap companies worldwide. It also ranks at the bottom of the Nifty 500 index.

The abrupt drop follows a big regulatory setback in Januarywhen the Reserve Bank of India (RBI) ordered Paytm's banking unit to discontinue most operations. The RBI ordered Paytm Payments Bank Ltd. to halt all banking operations by March 15, causing a sharp drop in the company's stock. Despite being part of billionaire Vijay Shekhar Sharma's fintech empire, Paytm Payments Bank is independent of the publicly traded mobile wallet company.

Paytm's parent company, One 97 Communications Ltd., is expected to disclose a significant increase in fourth-quarter net loss on Wednesday, its first financial release after the regulatory restrictions were enforced. Analysts estimate the net loss to increase to 4.6 billion rupees ($55 million) from 1.7 billion rupees a year ago, while sales are likely to remain relatively steady at 23.4 billion rupees.

Bloomberg surveyed 16 analysts, seven of whom recommended selling the stock, while the remaining nine recommended buying or holding. The average 12-month price target is 468 rupees, 30 per cent more than the present price.

Anand Dama, an analyst at Emkay Global, predicts an additional 16 per cent loss, arguing that the fourth-quarter figures "won't capture the full extent of business disruptions caused by the drop in UPI and bill payment market share."

The RBI's intervention has also resulted in a wave of top departures from Sharma's fintech conglomerate, including Surinder Chawla, CEO of the banking section, and Bhavesh Gupta, Paytm's former COO and president.

As Paytm prepares for its forthcoming earnings statement, the business confronts rising obstacles from regulatory scrutiny and investor mistrust.

(With inputs from Bloomberg)