Shares of Paytm dropped as much as 13 percent after the Reserve Bank of India (RBI) barred the company’s Paytm Payments Bank venture from accepting new customers.
The sell-off takes the stock’s decline from its November issue price to about 67 percent, and comes after the digital payments start-up had begun winning back the confidence of some analysts.
The action by the RBI is based on certain “material supervisory concerns” and the restrictions are to continue pending a comprehensive audit of its information technology (IT) systems, the central bank said in a statement on Friday.
Photo: Reuters
The company is taking steps to comply, including the appointment of an external auditor, it said.
Existing customers are not affected.
The stock traded down 10 percent at 693.40 rupees (US$9.06) at 14:09pm in Mumbai yesterday after earlier falling to 672 rupees.
UPGRADE CHANCES
Although recent developments are unlikely to have a major effect on business, it “substantially” reduces its chances of “upgrading” to a small finance bank, Macquarie Capital Securities (India) Pvt analyst Suresh Ganapathy wrote in a note.
It is eligible to apply for the 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 unserved 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.
It started operations in November 2017 after gaining its license in 2015.
Sharma spearheads the bank’s strategy and vision, its Web site says, and has played a vital role in the evolution of mobile payments in India.
ONE 97 RATING CUT
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, with an average price target of 1,230.56 rupees, Bloomberg data showed.
One 97 Communications raised US$2.5 billion in its IPO, but a 27 percent plunge during its debut on Nov. 18 last year 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 percent from its issue price of 2,150 rupees.
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