India’s booming tech sector suffers a big blow as Byju’s and Paytm plunge into crisis

India's booming tech sector has suffered a major blow as startup darlings Byju's and Paytm plunge into crisis amid regulatory scrutiny and alleged mismanagement.

Paytm, once a fintech star in India, has been mired in controversy since March 2022, after the Reserve Bank of India ordered the fintech giant's banking unit to stop onboarding new customers with immediate effect.

A subsequent audit "revealed persistent non-compliances and continued material supervisory concerns in the bank," the central bank said on Jan. 31.

Starting from March this year, Paytm was not allowed to continue accepting fresh deposits in its accounts or its digital wallet.

Yet to be profitable, Paytm is also reportedly being probed by the federal anti-fraud agency on possible violations of foreign exchange laws.

On Feb. 26, One97 Communications, the parent company of Paytm, said in an exchange filing that founder and CEO Vijay Shekhar Sharma had resigned from the board of Paytm Payments Bank.

During the pandemic, Paytm capitalized on the digital payments boom in India, reporting a 3.5 times growth in transactions. 

Investors like SoftBank, Alibaba Group and Ant Financial bet big on Paytm, but its stock price has slumped more than 70% since its IPO in November 2021.

SoftBank and Ant Group are now reportedly cutting their stakes in the payments company, according to local media.

Byju's, India's most valuable startup at one time, is also struggling to survive. 

The Indian edtech startup has seen its valuation plummet from $22 billion to $1 billion, and faces a series of problems including alleged accounting irregularities and purported mismanagement.

The unprofitable company, which offers services ranging from online tutorials to offline coaching, attracted billions of dollars from investors during the pandemic when traditional classrooms were shuttered.

The company is under scrutiny after the Indian government reportedly ordered an inspection into Byju's finances and accounting practices, according to Bloomberg on July 11.