Paytm was founded in 2010 by Vijay Shekhar Sharma
Vijay Shekhar Sharma, one of the most prominent faces of India's fintech industry, is facing a big crisis in a race to save his revolutionary digital payments firm - Paytm.
Mr Sharma faces the challenge to keep the company operations running and regain investors' confidence after the Reserve Bank of India (RBI) ordered Paytm's banking arm to stop most of its operations from March 1 over the violation of norms.
This marks a stunning twist in the Paytm story, which started from Aligarh in Uttar Pradesh, Vijay Shekhar Sharma's hometown.
A trained engineer, Mr Sharma set up internet connections at homes to make a living after completing his education. Over the years, he came to be counted in the country's top-100 richest club.
Big Push In 2016
Paytm was founded in 2010 by Mr Sharma as a pre-paid mobile bill payment platform. The company expanded to facilitating online instant payments through the Unified Payments Interface (UPI).
The big push came with demonetisation in 2016, when Rs 500 and Rs 1,000 currency notes were outlawed overnight, leaving millions struggling for cash. Many moved to online transactions, and Paytm emerged as a key player, quickly becoming the country's premier digital payments platform.
IPO Backlash
Paytm's 2021 IPO valuation faced a backlash from investors and analysts when the stock plummeted on its debut.
The company's IPO opened on November 8, 2021, in the price band of Rs 2,080-2,150 per share. The Paytm IPO made history with over Rs 18,300 crore share sale making it the largest public issue in India's corporate history.
But the company's stock made a weak debut in the market on November 18 and hit a lower circuit after recording about 20 per cent decline during trading hours. It finally closed at Rs 1,560, down by about 27 per cent.
The firm's big backer SoftBank recently pared its stake, while other key investors Alibaba and Buffett's Berkshire Hathway sold their holdings.
Revenue Sources
Paytm has two major sources of revenue - its merchant payment business and loan business. Merchant payments constitutes roughly 60% of total income and loans account for about 20%.
The fintech company charges merchants a platform fee to use Paytm's payment gateway, among other subscription-based services and products such as a soundbox and card swipe machine.
It also provides loans under partnerships with some banks and non-bank financial companies, taking a cut of the interest. Paytm Payments Bank was one of these entities through which it provided loans.
RBI Crackdown
The RBI last week ordered Paytm Payments Bank to wind down most of its businesses, including deposits, credit products and its popular wallet by February 29 for "persistent non-compliances" and "supervisory concerns".
Hundreds of accounts created on Paytm Payments Bank without proper identification were one of the major reasons behind the RBI imposing stringent curbs on the company, reports quoted sources as saying.
The RBI is concerned that some of the accounts could have been used for money laundering
In a post assuring users, Vijay Shekhar Sharma has described the RBI's action as a "speed bump".