Paytm Stocks Fall 10% in Three Sessions and Hit Lower Circuit for Second Straight Day

One 97 Communications’ shares dropped 5% on Thursday, hitting the day’s low of Rs 385.90. On Wednesday, the shares had reached 406.15 each after hitting the lower brand circuit.

This occurs because, according to the RBI, payment aggregator Paytm is the target of supervisory and non-compliance issues. Paytm has reorganized its board of directors, including the appointment of many prominent industry veterans, after the resignation of Vijay Shekhar Sharma from his role as the part-time non-executive Chairman of Paytm Payments Bank Ltd.

Experts say that the decline in share price suggests that investors’ nerves have not been eased by Sharma’s departure. Paytm shares touched the upper circuit for the last two sessions in a row.

The RBI initiated regulatory action against the aggregator in January and prohibited it from taking any new deposits or top-ups in wallets, accounts, FASTags, and other instruments starting at the end of February. Later, the deadline was moved to March 15.

Macqurie’s reaffirmation of an underperform rating on the counter with a price objective of Rs 275 has dealt the latest blow. The Australian brokerage has already expressed negative opinions about the counter.

According to Macquarie’s most recent stock analysis, Sharma is attempting to extract some value from PPBL and letting the regulator know that he is prepared to cede control of Paytm Payment’s Bank.

The brokerage note said that while PPBL’s existence is in jeopardy, the Reserve Bank of India (RBI), the banking regulator, would need to provide concessions. “In the future, we do not anticipate the RBI to approve any related-party transactions involving Paytm and PPBL,” the statement said.

Although some lending partners have indicated that they are reevaluating their partnership with Paytm, Macquaries said that if partners cut down or discontinue their connections with Paytm, it may negatively impact the company’s lending operations.

In the recent few trading days, Paytm shares have recovered to trade 20% above the 52-week low of Rs 318, which was reached on February 16. The stock is still, however, over 50% below its closing price of Rs 761.20 on January 31.

Brokerage company UBS predicted that Paytm will lose between 5 and 7 percent of its 25 percent market share in the payments sector, with the majority coming from merchant and customer turnover and wallet loss accounting for 2 to 3 percent of the total.

Goldman Sachs has a “neutral” rating on the company with a lowered target price of Rs 450, while Morgan Stanley has maintained a “equal-weight” call with a target price of Rs 555. Reputable stockbroker Jefferies removed its rating on Paytm after adding it to the list of companies that aren’t rated.