Shares of Paytm parent One 97 Communications tumbled down more than 13% on March 14 to an all-time low at Rs 675 on the National Stock Exchange (NSE) after the Reserve Bank Of India prohibited Paytm’s payments bank from onboarding new customers and asked it to take up an IT audit.
Shares of One 97 Communications had an IPO price of Rs 2,150, now it has almost fallen to Rs 675, which means it has plunged 68% YTD from its listing price.
Why RBI Barred Paytm Payments Bank?
The Reserve Bank of India (RBI)on Friday, the last of the trading week, ordered Paytm Payments Bank Ltd to halt onboarding new customers with immediate effect and conduct a full-fledged audit of the IT system, citing “material supervisory concerns”.
Paytm Payments Bank can resume onboarding of new customers only when the RBI permits it after reviewing reports of the IT auditors, the RBI said.
“This action is based on certain material supervisory concerns observed in the bank,” the central bank said.
“The RBI has, today, in the exercise of its powers, inter alia, under Section 35A of the Banking Regulation Act, 1949, directed Paytm Payments Bank to stop, with immediate effect, onboarding of new customers,” it said.
RBI approved Paytm Payments Bank in 2017.
What Brokerage Firms Have To Say?
Morgan Stanley downgraded Paytm stock to ‘equal-weight’ from ‘overweight’ as RBI’s measure on the fintech company looms regulatory uncertainty over the company.
Morgan Stanley has trimmed its price target to Rs 935 from Rs 1,425.
Similarly, Brokerage firm Macquarie Securities India has slashed the price target to Rs 700.
Analysts at ICICI Securities told news agency Reuters that fintech would have to strive to enhance engagement with the already user base to offset any severe impact of the embargo on new users.
“Now, expecting moderation in the onboarding of new users and the adverse impact on incremental payment revenue… we revise our target price to ₹ 1,285 (earlier ₹ 1,352),” the research firm said, adding that it might defer the company’s plan to apply for conversion into a small finance bank.
What Does Paytm Payments Bank Mean For Paytm?
The payments bank is a rewarding business of Paytm. Its revenue saw 98% YoY growth in payments and financial services vertical in the third quarter of the financial year 2022.
Payments services to consumers increased 60%, while payments services to merchants increased massively by 117%, driven by MDR-instruments.
The loan disbursal in the quarter ended 31 December 2021 rose 401% on the year.