Digital payments giant Paytm’s shares plunged further, reaching an all-time low on Wednesday.
The crisis-ridden fintech firm, witnessed an erosion of investor wealth, shedding over ₹1.17 lakh crore in market capitalization over a span of 27 months.
Shares of One97 communications, the parent company of Paytm, were on a free fall since the beginning of this month. The regulatory hammering wiped out more than 41% of the counter in February so far, falling to Rs.447.10 from it’s close at Rs. 761 apiece on January 31.
Initially, Paytm shares fell 10% on Thursday after a two-day rally, as RBI officials commented that the action against Paytm was taken due to non-compliance. RBI Governor Shaktikanta Das said, “The restrictions on Paytm are proportional to the gravity of the situation and cannot compromise systemic stability or depositor’s interests”
The stock, which debuted on the Indian stock market with much fanfare in 2021, has now spiralled to a dismal 84% below its initial public offering (IPO) price of ₹2,150.
On Wednesday, Paytm shares plummeted by an additional 10%, bottoming out at ₹342.15 apiece on the BSE, marking a new low for the company.
This drastic downturn follows a recent downgrade by global brokering firm Macquarie, which slapped an 'Underperform' rating on Paytm's stock, setting a target price of ₹275. The downgrade came in response to regulatory changes, particularly the RBI’s decision to restrict Paytm Payments Bank from offering key services beyond February 29th.
Suresh Ganapathy, an analyst at Macquarie, voiced concerns over Paytm's ability to retain customers and maintain its business model amidst regulatory headwinds.
The brokerage highlighted the potential fallout with lending partners, citing indications that some partners are reconsidering their relationship with Paytm, which could significantly dent its lending business revenues.
Macquarie's assessment of Paytm's trajectory has undergone notable shifts since the company's IPO. Initially bullish on the stock, the brokerage set a target price of ₹1,200 upon Paytm's listing, followed by a double upgrade in 2021 with a target price of ₹800. However, the outlook soured in 2022, with a target price of ₹450 and an 'Underperform' rating.
Market sentiment towards Paytm remains mixed, with approximately 40% of analysts advocating a 'Buy', 20% recommending 'Hold', and another 40% suggesting 'Sell', according to data from Bloomberg.
Commenting on Paytm's current predicament, Sudip Bandyopadhyay of Inditrade Capital urged caution by labelling the stock as "avoidable" and likening it to a "falling knife”
Bandyopadhyay highlighted the challenges associated with transitioning a vast customer base to alternative banking solutions within a short timeframe.
The sell off came after remarks by RBI governor, Shaktikanta Das on Monday where he said the central bank will not go back on its order against PPBL.
Das stated, “The decision against Paytm Payments Bank(PPBL) will not be reviewed”, he emphasized that RBI takes action against regulated entities after a comprehensive assessment”
Responding to the queries raised in regarding FAQ’s (Frequently asked questions), he said “FAQ’s will be issued for the benefit of its customers and keeping up with the investors confidence, which will be announced after the 606th meeting of the Central Board of Directors of RBI”
Das further remarked that RBI is always supportive of the fintech sector, and that it is the endeavour of the central bank to ensure its rapid growth.
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