Paytm, the prominent payment app in India operated by One 97 Communications Ltd, faced a significant setback as its shares experienced a sharp decline of nearly 20%, closing at INR 609. The market turmoil follows a notice from the Reserve Bank of India (RBI), adding to the challenges already faced by the company.
Budget Impact on Technology Sector: The 2024 budget announcement had implications for the technology sector, including fintech companies like Paytm, but recent market performance has shifted the focus from broader sectoral analysis.
Market Capitalization Hit: Following the stock’s decline, Paytm’s market capitalization fell to INR 38,663 crores, with concerns of further declines looming, especially after the RBI’s stringent directives.
Performance Overview: Despite a positive return of approximately 16.25% over the past year, Paytm has delivered a negative return of 22.64% in the last six months and about a 5.74% negative return since the start of 2024, indicating volatility in its stock performance.
RBI’s Directive: The recent directive from the RBI to Paytm Payments Bank Ltd, a subsidiary of One 97 Communications Ltd, to cease accepting new deposits or conducting credit transactions from March 1, has raised regulatory concerns for the company.
Company’s Response: Paytm, in its filings, expressed concerns over the potential adverse impact of the RBI’s actions, projecting an annual EBITDA ranging between INR 300 to 500 crores but emphasizing the need for continued improvement in profitability.
Recent Developments: The stock faces scrutiny, with Alibaba selling its remaining stake in One97 Communications at an average price of INR 642.74 per share. Additionally, the RBI imposed a monetary penalty of INR 5.39 crores on Paytm Payments Bank for failing to comply with certain provisions.
Institutional Holdings: As of the December 2023 quarter, Foreign Institutional Investors (FIIs) held 63.72% of Paytm’s shares, while Domestic Institutional Investors (DIIs) owned 6.07%, totaling 69.79% institutional holding.
