On Tuesday, One 97 Communications, the parent company of the digital services brand Paytm, experienced a significant decline, plummeting over 11% to reach a record low of Rs 474 on the Bombay Stock Exchange (BSE). Analysts attribute this downturn to reports indicating heightened competition in the fintech sector, particularly with the entry of Jio Financial Services, a venture of Reliance Industries set for demerger and listing. According to Macquarie Research cited by Business Standard, Jio Financial Services could potentially become India’s fifth-largest financial services firm.

Analysts, including Prashanth Tapse, Research Analyst and Senior Vice-president- Research at Mehta Equities, noted the potential threat to Paytm from Jio Financial services, which is poised to enter the domain occupied by Paytm, PhonePe, and even Bajaj Finance. This development has raised concerns within the sector.

Throughout Tuesday’s trading session, Paytm’s stock experienced a series of declines, reaching record lows in the morning. Although there was an attempt at recovery from these low levels, the overall sentiment remained weak. Paytm has been a disappointment for investors since its initial public offering (IPO) last year. Notably, Softbank, an early investor, recently sold a 4.5% stake at a discounted price, further dampening investor sentiment.

Analysts emphasized the impact of excess supply of shares in the market, largely from pre-IPO placements and non-promoter investors. The lock-in period for pre-IPO investors, which expired on November 15, has contributed to a substantial supply of shares. Rahul Sharma, Research Head at Equity 99, highlighted that the largest investor selling its stake post-IPO has weakened confidence in Paytm.

Despite being listed on November 18 last year at an IPO price of Rs 2,150 per share, Paytm’s stock is currently trading at Rs 483, leading to significant losses for investors. Other new-age stocks, such as Nykaa and Policybazaar, listed around the same time, are also facing market challenges. Nykaa is trading at Rs 177.30 (down 3.41%), while Policybazaar is over 1% lower at Rs 407.25, with both stocks now free from the lock-in period. Analysts argue that the market is not currently justifying valuations for non-profit-making companies like Paytm.