Paytm Reaches New Low Despite Clarification That Business ‘Strong’



Shares of One97 Communications, the parent company of digital payments major Paytm, hit a new low at Rs 536.20, down 1.4 percent over BSE in trade during Wednesday. The stock is down nearly 5 per cent from its intraday high of Rs 562, despite the company’s clarification to the stock exchanges.

“The company would like to note that its business fundamentals remain strong as shown in its latest earnings release dated February 4, 2022,” One 97 Communications said in a response that sought the significant movement in its share price.

As on date, there is no information/announcement, which in our opinion may have an impact on price/volume behavior in the company’s book and which has not yet been disclosed to stock exchanges, the company said.

In the past month, the stock is down 35 percent, compared to a 1 percent rise in the S&P BSE Sensex. The stock lost 75 per cent of its issue price of Rs 2,150 per share. It hit a record high of Rs 1961.05 on the day of listing i.e. November 18, 2021, in intra-trade, but failed to touch the issue price after the listing.

The sharp drop in the price of the Patym market continued, due to the continued flow of negative news. The Reserve Bank of India (RBI) on March 11, 2022 banned Paytm Payments Bank (PPBL) from taking on new clients with immediate effect due to some supervisory concerns. PPBL processes transactions for India’s digital payments giant Paytm.

PPBL will need specific permission from the RBI to restart clients after audit review. Paytm said PPBL was taking immediate steps to comply with RBI directives and was looking to appoint a reputable external auditor to conduct a comprehensive audit of its IT systems.

ICICI Securities believes that this ban will have a negative impact on the addition of new clients to the portfolio, and savings/current account. The ban on customer acquisition will hamper business growth at Paytm PB, which aims to add half a billion customers to its fold. Also, the PPBL plan to apply for transfer to a microfinance bank may defer.

Meanwhile, on March 16, 2022, in a note to the company, Macquarie lowered Paytm’s target price to Rs 450 from Rs 700 earlier.

“Recent developments significantly reduce the likelihood of obtaining a bank license to lend, in our view. Other adverse regulatory factors include digital payments paper potentially blocking wallet fees and stricter BNPL and KYC regulations,” the foreign brokerage said.

“The challenge in evaluating Fintech or modern companies in general is negative earnings and FCF. Hence, the multipliers are based on sales figures – the level of subjectivity here can be very high. Thus, the multipliers of such companies can be corrected very sharply. Risks The brokerage firm said Our recommendation includes monetizing the UPI and receiving a banking license.”


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