Paytm Shares Extend Losses; Slide 10% Amid Regulatory Crackdown, Down 53% Since RBI Ruling

Paytm shares continued their downward spiral, plunging another 10% on February 14, breaching the crucial Rs 350 mark. The crisis deepens for One97 Communications, the parent company, as its stock has plummeted by 65.5% from its 52-week high of Rs 998.3 per share in October 2023. The latest blow comes after the Reserve Bank of India (RBI) imposed strict restrictions on Paytm Payments Bank (PPB) on January 31.

Since the RBI's intervention, Paytm shares have witnessed a decline of around 53%, underscoring the severity of the challenges facing the digital payment giant. The central bank's action stemmed from "persistent non-compliances and continued material supervisory concerns in the bank," citing major irregularities in Know Your Customer (KYC) procedures that exposed customers, depositors, and wallet holders to significant risks.

The RBI's investigation revealed alarming findings, pointing to thousands of cases where the same Permanent Account Number (PAN) was linked to over 100 customers, and in some instances, more than 1,000 customers. The magnitude of these irregularities raised concerns over money laundering, with transactions exceeding the regulatory limits in minimum KYC pre-paid instruments, running into crores of rupees.

As a consequence, the RBI directed PPB to cease accepting deposits, credit transactions, or top-ups in various customer accounts, prepaid instruments, wallets, FASTags, and NCMC cards after February 29. The regulator also mandated the settlement of all pipeline transactions and nodal accounts by March 15.

In the wake of these regulatory measures, several foreign brokerages, including CLSA, Morgan Stanley, Jefferies, and Bernstein, have significantly revised their target prices for One97 Communications (Paytm), with Macquarie emerging as the most bearish on the Street. The agency downgraded One97 Communications to 'underperform' and slashed the target price from Rs 650 per share to Rs 275 per share, marking a 60% reduction.

This downgrade by Macquarie comes exactly a year after the agency had double-upgraded the stock from 'underperform' to 'outperform.' The sharp reversal underscores the swift and dramatic change in sentiment surrounding Paytm's prospects, reflecting the challenging landscape the company now faces.

Paytm shares were observed trading with cuts of more than 9% at Rs 345.30 per share as of 1:20 pm on the National Stock Exchange (NSE). Investors are closely monitoring the unfolding situation, and market analysts suggest that the road to recovery for Paytm may be arduous, given the magnitude of regulatory scrutiny and the need for comprehensive reforms in compliance and risk management.