Paytm, one of India’s leading payment apps operated by One 97 Communications Ltd, experienced a significant setback as its shares plummeted by nearly 20% to close at INR 609. The sharp decline triggered a lower circuit in the stock market, causing concern among investors. This downturn came on the heels of a notice from the Reserve Bank of India (RBI), which added to the company’s existing challenges.
- Budget Impact on Technology Sector: With the 2024 budget announcement, the technology sector, including fintech companies like Paytm, anticipated the potential implications. However, Paytm’s recent market performance has overshadowed broader sectoral analysis.
- Market Capitalization Hit: Following the stock’s decline, Paytm’s market capitalization fell to INR 38,663 crores. The anticipation of further declines looms large, 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 5.74% negative return since the start of 2024, indicating volatility in its stock performance.
- RBI’s Directive: The RBI’s recent order to Paytm Payments Bank Ltd, a subsidiary of One 97 Communications Ltd, to halt accepting new deposits or conducting credit transactions from March 1, has raised alarms. The directive marks a significant regulatory challenge for the company.
- Company’s Response: Paytm, in its filings, expressed concerns over the potential adverse impact of the RBI’s actions. The company projected its annual EBITDA could range between INR 300 to 500 crores but emphasized the need for continued improvement in profitability.
- Recent Developments: The stock has been under scrutiny, especially with Alibaba selling its remaining stake in One97 Communications at an average price of INR 642.74 per share. Furthermore, RBI imposed a monetary penalty of INR 5.39 crores on Paytm Payments Bank for failing to comply with certain provisions, including delayed reporting of a cybersecurity incident.
- 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.