In a significant turn of events, the shares of One 97 Communications Ltd, commonly known as Paytm, experienced a drastic 20% plunge, dipping below the crucial Rs 500-mark. This downturn comes in the wake of the Reserve Bank of India’s (RBI) directives concerning Paytm Payment Bank, marking a sharp decline from its 52-week high of Rs 998.30 recorded in October last year.
Analyzing the Decline: RBI Restrictions and Financial Implications
The sharp decline in Paytm’s stock is attributed to the impact of RBI restrictions on Paytm Payment Bank, leading to a grim estimate of a Rs 300-500 crore hit on EBITDA annually. The company disclosed this during a conference call held on Thursday, emphasizing the need for operational changes to address the challenges posed by the regulatory directives.
Paytm’s Response and Roadmap Ahead
During the conference call, Paytm management acknowledged the significant setback caused by the RBI actions, referring to it as a substantial speed bump. They outlined the necessity for operational adjustments and assured stakeholders that the migration process is expected to be completed before the cutoff date. Despite short-term profitability concerns, Paytm expressed optimism about long-term improvements and outlined strategies to offset the impact in the medium term.
Vijay Shekhar Sharma, the founder of Paytm, reassured users in a tweet, stating that the app would continue to function seamlessly beyond February 29. He appreciated the users’ unwavering support and emphasized the commitment of the Paytm team to serve the nation in full compliance with regulations.
Expert Opinions and Market Response
Financial analysts, including those from Arihant Capital and Motilal Oswal Securities, weighed in on the situation. While Arihant Capital highlighted Paytm’s proactive approach in navigating the challenges, Motilal Oswal Securities expressed concerns about the significant impact on Paytm’s business performance. The latter maintained a watchful stance on the resilience of Paytm’s business model and its ability to navigate the uncertain regulatory and macro environment, maintaining a Neutral rating with a target of Rs 575.
