Is Paytm A Sinking Ship? Waves Of Shocks Push Paytm Shares To Record Low

Paytm, one of the largest fintech companies in India, has faced massive road-blocks since the Reserve Bank of India cracked a whip on Paytm Payments Bank on January 31 and there after the company has been battling a series of shock waves that has pushed the company's share price to a record low.

In a latest development, the Employee Provident Fund Organisation (EPFO) has said that it will block deposits and credits into EPF accounts linked with Paytm Payments Bank following RBI restrictions starting February 23.

The news comes right after Paytm Payments Bank independent director Manju Agarwal resigned from the board effective February 1. The resignation comes one day after the RBI restricted the Paytm Payments Bank from accepting and processing new deposits or top-ups in customer accounts, wallets, FASTags or any other instruments from February 29.

Payment Bank's licence is now on the Reserve Bank of India's radar as per many media reports and it is yet to be seen if the central bank takes that decision in the coming days.

What Really Happened In the Stock Market and Why?

Paytm shares have lost over 6% today at BSE and with this it has touched a new record low. Overall, the company has lost nearly 45% of its value in the stock market since January 31 and has hit lower circuit.

Paytm has gotten itself into trouble for all the wrong reasons and the central bank has discovered fake accounts without KYC verification apart from other compliance issues with the digital-payment company, according to media reports.

The RBI said that the restriction on Paytm Payments Bank was a result of persistent non-compliance of regulatory norms. RBI Deputy Governor Swaminathan J said that they are monitoring Paytm Payments Bank and will take appropriate steps as warranted going forward.

Addressing the media, RBI Governor Shaktikanta Das said the strict action was taken keeping in mind the gravity of the violation.

Historically it is observed that a regulatory warning is enough to push a company's shares down. An immediate impact on Paytm shares was more or less warranted following these announcements.

What Experts Predict About Paytm's Future?

"The ongoing problem of its payments bank due to compliance issues raised by RBI has led to a severe loss of trust amongst retail investors as can be seen in its recent stock price slump," said AR Ramachandran from Tips2trades.

"Unless some positive news comes out of RBI coupled with the Paytm management instilling confidence amongst investors regarding their other business verticals' growth, the price trend could continue to be bearish with major resistance at 528 on the Daily charts."

Many took to social media and said Paytm remains vulnerable while its top 10 shareholders lost over Rs 6,206.9 crore in investor wealth in the wake of a 20% fall in share price in a day after January 31, according to a report from NDTV Profit.

Market is still speculating the news about a deal at a time when Paytm's Payments business is being monitored led by a regulatory crisis. Paytm E-commerce has changed its name to Pai Platforms and has acquired Bitsila, a seller platform on ONDC, according to a report from PTI.

While the regulators are expected to be monitoring the company and Paytm Payments Bank, the fintech giant will likely have a longer battle to fight to survive in India amongst investors and common man.