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BUSINESS EYE DECEMBER 15, 2023 | The Indian Eye 34

Is drop in Paytm’s stock price a symbol

of bigger crisis in Indian start-up sector?

More than 60 Indian startups have more than $250,000 stuck in accounts with Silicon Valley
Bank and nearly two dozen have more than $1 million tied with the lender

OUR BUREAU
Bengaluru/Mumbai

he start-up universe in India
has been facing a crisis, with
Tfunding crunch and loss of jobs.
In a bid to cut costs, many companies
have been forced to downsize their
workforce as much as possible. In the
first half of this year, approximately
70 startups laid off 17,000 employees.
Further, recent data shows that over
the past two years, 1,400 new-age
companies have resorted to nearly
91,000 job cuts.
Now, it is being reported that
Paytm, India’s digital payments firm,
experienced a significant drop of up
to 20% in its stock price on Thursday.
This decline, the largest since its list-
ing two years ago, comes as a result
of the company’s decision to reduce
the issuance of low-value personal
loans following the Reserve Bank of
India’s (RBI) tightened regulations
on consumer lending. Shares of One
97 Communications, the entity behind
Paytm, closed the day at Rs 660.70,
down Rs 152.35 or 18.74%. Paytm founder and CEO Vijay Shekhar Sharma speaks at Global Fintech Fest (GFF), in Mumbai recently (ANI file photo)
The non-bank lender announced
on Wednesday that it will be cautious
in providing loans below Rs 50,000 but Goldman Sachs also stated that Despite the recent decline, Paytm’s since the 2008 financial crisis is also
will focus on expanding its portfolio of Paytm’s net income is expected to shares have still shown a 25% in- impacting firms 8,000 miles away.
high-value personal and commercial turn positive in the fiscal year 2025-26, crease this year, outperforming the Dozens of young Indian startups
loans. The move by Paytm reflects a which is a year later than previous- Nifty financial services index, which backed by the likes of YC, Accel, Se-
more cautious stance in this lending ly anticipated, due to a slowdown in has grown by 10.7%. quoia India, Lightspeed, SoftBank
segment, according to statements revenue growth. Despite the decrease Currently, Paytm has seven non- and Bessemer Venture Partners
from Bhavesh Gupta, the company’s in loan volume through its post-paid bank finance companies (NBFCs) as banked with Silicon Valley Bank,
president and chief operating officer, product, Paytm predicts that the im- lending partners and plans to add one sometimes as their only banking part-
during discussions with analysts. Gup- pact on revenue growth will be mini- bank and two NBFC partners. Ana- ner, and couldn’t take out the money
ta explained that considering recent mal, with an estimated decline of ap- lysts at IIFL Securities have noted that on time on Thursday, multiple people
macro developments and regulato- proximately 40%-50%. the recent regulatory tightening by familiar with the situation said.
ry guidance, Paytm, in collaboration Jefferies, a global investment the RBI is resulting in a slowdown in VCs are cautious about divulging
with its lending partners, has opted to banking firm, believes that the mod- growth and an increase in delinquen- the names of the impacted startups
reduce loan offerings below Rs 50,000. eration in loan disbursal is happening cies in certain segments of unsecured out of fear that it might impede the
According to a Reuters report, an- earlier than expected. Consequently, consumer loans. young firms’ prospects of raising cap-
alysts at Goldman Sachs believe that they have reduced their revenue esti- Since the crisis began in the Silicon ital in the future. Regulators stepped
increasing the number of high-value mate for the financial years 2024-2026 Valley, more than 60 YC-backed Indi- in Friday to shut down Silicon Valley
loans will not entirely compensate for by 3%-10% and lowered the target an startups have more than $250,000 Bank, the 16th largest in the U.S. and
the reduction in smaller loans. As a re- price from Rs 1,300 to Rs 1,050. stuck in accounts with Silicon Valley lifeblood for startups, citing “inade-
sult, it downgraded One 97 Communi- In the July-September period, Bank and nearly two dozen have more quate liquidity and insolvency.” The
cations, the parent company of Paytm, post-paid loans, which allow custom- than $1 million tied with the lender, Federal Deposit Insurance Corpora-
from a ‘buy’ to a ‘neutral’ rating and ers to pay for purchases in install- according to a survey by and among tion will work to recover “the maxi-
lowered its price target from Rs 1,250 ments without interest, accounted for the startups seen by TechCrunch, il- mum amount possible from the dispo-
to Rs 840. more than half of Paytm’s total loans. lustrating how the worst bank failure sition of assets,” it says on its website.

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