In yet another blow to the financial markets, Paytm’s stock witnessed another staggering 10 percent decline on February 5, triggering the lower circuit once again. This latest dip extends the free fall to over 42 percent in the last three trading sessions, adding to the fintech giant’s mounting troubles.
The downward spiral commenced following the Reserve Bank of India’s (RBI) imposition of stringent measures on Paytm’s payments bank unit. These restrictions include limitations on accepting new deposits and executing credit transactions after February 29. Since then, Paytm’s stock has tumbled from Rs 761.4 to Rs 438.5 as of Monday morning.
Brokerages responded swiftly to the regulatory intervention, with notable downgrades in Paytm stock ratings and target prices. Jefferies revised the target price to Rs 500, while Macquarie adjusted it to Rs 650, reflecting a lack of confidence in the company’s immediate recovery.
Over the weekend, Paytm found itself in crisis management mode, attempting to mitigate the fallout from a stream of negative news. Denying any ongoing investigation by the Enforcement Directorate (ED) related to potential money laundering activities, the company refuted claims suggesting a probe might be initiated.
Adding to the turbulence, news reports surfaced suggesting that the RBI could contemplate canceling Paytm’s banking license as early as next month. However, it was emphasized that this would only occur once the safety of depositors’ money is assured. The banking regulator had previously curtailed most of Paytm’s banking activities, citing concerns raised over the past two years regarding dealings between its payments app and banking unit.
Analysts at Jefferies, on February 2, had already issued an underperform call on Paytm stock, setting a target price of Rs 500 per share. The accompanying report highlighted concerns about the recent events impeding the company’s growth trajectory and elongating its profitability timelines.
