Shares of Paytm, the Indian fintech company, witnessed a steep decline of 20 percent in early trading on February 1. The drop in share prices came in response to the Reserve Bank of India’s (RBI) stringent restrictions on Paytm’s lending business, including a ban on accepting new deposits and conducting credit transactions after February 29.
At the start of trading, Paytm’s stock triggered the lower circuit, opening at Rs 609 per share, down 20 percent on the National Stock Exchange (NSE) compared to the previous session’s closing price. On January 31, the fintech firm’s shares settled at Rs 761 per share.
Year-to-date, Paytm’s stock has experienced a decline of approximately 1 percent, while in 2023, it incurred a substantial loss of 27.45 percent. As of the December 2023 quarter, mutual funds held approximately a 5 percent stake in Paytm, a significant increase from the 2.79 percent stake reported in the previous quarter.
The Reserve Bank of India’s action followed the findings of a validation report by external auditors, which revealed “persistent non-compliances and continued material supervisory concerns” in Paytm Payments Bank. Consequently, the RBI imposed these strict measures on the company.
In response to the regulatory action, Paytm issued a statement to stock exchanges, indicating that it is taking immediate steps to comply with the RBI’s directives. The company also expressed its commitment to working closely with the regulator to address their concerns promptly.
Paytm acknowledged that, depending on the nature of the resolution, it anticipates a worst-case impact of Rs 300-500 crore on its annual EBITDA. However, the company remains optimistic about its ability to continue its efforts to enhance profitability despite the regulatory challenges it faces.
