Surinder Chawla’s Departure and Bank of America’s Rating Weigh on Paytm’s Market Performance
Paytm, India’s leading digital payments platform, experienced a setback on April 10 as its shares dipped nearly 3 percent following the resignation of Surinder Chawla from his role as Managing Director and Chief Executive Officer of Paytm Payments Bank. Chawla cited personal reasons and a desire to explore better career opportunities for his departure.
According to a regulatory filing by Paytm parent company One 97 Communications, Chawla is scheduled to be relieved of his duties on June 26. The filing also mentioned the termination of most agreements between the company and PPBL, signaling significant changes within the organization. The board of Paytm Payments Bank has been revamped, now comprising five independent directors, including an independent chairperson, with no nominees from the parent company.
The recent resignation follows the departure of founder Vijay Shekhar Sharma from the board of PPBL on February 26, which facilitated the board’s restructuring.
Paytm shares were trading 2.8 percent lower at Rs 392.90 on the National Stock Exchange (NSE) at 9:22 am on April 10, reflecting investor concerns over the leadership transition and its potential impact on the company’s future.
The turbulence faced by Paytm began on January 31 when the Reserve Bank of India (RBI) imposed significant restrictions on PPBL, including a ban on accepting fresh deposits and conducting credit transactions after February 29. Although the deadline was extended to March 15 on February 16, the regulatory scrutiny has affected Paytm’s market performance.
In a bid to mitigate the impact, Paytm received approval from the National Payments Corporation of India (NPCI) to participate in UPI services as a third-party application provider (TPAP) under the multi-bank model, just before the RBI’s ban was to take effect.
Despite these efforts, Paytm’s market share in the unified payments interface (UPI) segment dropped to 9 percent in March, the lowest in four years, following a similar decline in February after the RBI’s restrictions on PPBL.
Adding to Paytm’s challenges, Bank of America (BofA) has resumed coverage on the stock with an ‘underperform’ rating and a target price of Rs 400, indicating a 1 percent downside from the previous closing price. BofA anticipates sluggish growth in Paytm’s lending business, further dampening investor sentiment.
Despite the setbacks, Paytm has witnessed increased investment interest from foreign portfolio investors (FPIs), with new FPIs entering the fray. Additionally, domestic institutional investors (DIIs) have raised their stakes, driven by investments from leading mutual funds in the fourth quarter of the fiscal year.
