(Daily Point) — India’s technology sector faced a significant setback with the impending failure of Paytm, one of the country’s leading fintech companies, attributed to mismanagement and regulatory issues.
Founded in 2010 in Noida, India, Paytm aimed to integrate Indian citizens into the mainstream economy. However, in March 2022, the Reserve Bank of India issued an order for the company to immediately cease acquiring new customers.
On February 26, One97 Communications, Paytm’s parent company, confirmed the resignation of the CEO and founder, Vijay Shekhar Sharma. Despite experiencing profitability during the pandemic-driven surge in online shopping, Paytm faced challenges with its major investors, including SoftBank, Alibaba Group, and Ant Financial, leading to a decline in stock prices in 2021. Reports suggested that SoftBank and Ant Financial reduced their stakes in the company post-pandemic.
Starting March, Paytm was barred from accepting new deposits in digital wallets and accounts. Ashish Wadhwani, co-founder and managing partner of IvyCap Ventures, emphasized the increased responsibility of venture capital investors and founders in ensuring sound governance within companies.
Global startup platform Tracxn reported elevated venture funding until 2023 when it experienced a downturn. On March 7, regulatory actions led to a substantial decrease in Paytm’s valuation to $3 billion.
Ashish Wadhwani from IvyCap Ventures acknowledged the stretched valuations in 2021 and early 2022, highlighting the inevitability of companies with unsustainable models going out of business, as funding at inflated valuations becomes increasingly scarce.
