Paytm Slumps as RBI Bars Payments Bank Taking New Customers
Paytm Tumbles After RBI Imposes Restrictions on Payments Bank
(Bloomberg) -- Shares of Paytm dropped as much as 13% after the Reserve Bank of India barred the company’s Paytm Payments Bank venture from accepting new customers.
The selloff takes the stocks decline from its November issue price to about 67% and comes after the digital payments startup had begun winning back the confidence of some analysts.
The action by the RBI is based on certain “material supervisory concerns” and the restrictions will continue pending a comprehensive audit of its information-technology systems, the central bank said in a statement on Friday. The company is taking steps to comply, including the appointment of an external auditor, it said in response. Existing customers aren’t affected.
The stock traded down 10% at 696.85 rupees at 12:39 p.m. in Mumbai after earlier falling to 672 rupees.
Though recent developments are unlikely to have major business impact, it “substantially” reduces its chances of “upgrading” to a small finance bank, Suresh Ganapathy, analyst at Macquarie Capital Securities (India) Pvt., wrote in a note.
It is eligible to apply for this license in May, the brokerage said, while retaining its underperform rating on the stock.
A small finance bank is a segment created by the RBI with an intention to bring basic banking services to the un-served and underserved segments of the country.
Paytm Payments Bank is a joint venture of One 97 Communications Ltd., which is commonly known as Paytm, and the company’s founder Vijay Shekhar Sharma.
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It started its operation in November 2017 after getting its license in 2015. Sharma spearheads the bank’s strategy and vision, according to its website, and has played a vital role in the evolution of mobile payments in India.
Separately, Morgan Stanley analyst Sumeet Kariwala cut the recommendation on One 97 Communications to equal-weight from overweight. It has a price target to 935 rupees.
The company has four buy, two hold and three sell recommendations, according to Bloomberg data, with average price target of 1,230.56 rupees.
One 97 Communications Ltd. raised $2.5 billion in its IPO but a 27% plunge in its Nov. 18 debut made it one of the worst initial showings by a major technology firm since the dot-com bubble era of the late 1990s. The stock is now down nearly 67% from its issue price of 2,150 rupees.
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