Paytm: How Does the Company Fare after the Drastic Fall?

The New Age Indian FinTech company, whose Initial Public Offer came at a offer price of Rs. 2100 has fallen drastically from there losing more than 80% of the value of its offer price and currently trading at Rs.393 a piece on 18th April.

Why such a drastic fall?

In the past months, the stock has hit a major low. The decline came as the Reserve Bank of India (RBI) ordered the shutting of operations of Paytm Payments Bank including deposits, credit products and digital wallets due to non-compliance.

The regulator reportedly found major irregularities in KYC, which exposed the customers, depositors and wallet holders to serious risks. The deputy governor added that the particular actions were preceded by months or years of bilateral engagement and that regulated entities (like Paytm PB) are provided adequate time to take corrective action to protect consumers and the financial stability of the system.

With this into effect, the stock went from Rs.765 to Rs.320 within two weeks losing more than 55% of its value.

Analysts and Brokerage’s view

After this many analysts have changed their views on the stock, The Majority of analysts have turned negative and have changed the rating to “Underperform” from “Buy” and they have also trimmed the target price for the stock.

Recent Positive news

On March 14, the National Payments Corporation of India (NPCI) approved OCL to partake in UPI services as a TPAP within the multi-bank model. This long-awaited licence enables Paytm to sustain its provision of UPI services to its app users, following the cessation of operations by its banking unit, PPBL, after March 15 due to regulatory action.

“Following NPCI’s approval on March 14, 2024, to onboard OCL as a Third- third-party application Provider (TPAP), Paytm has expedited the integration with Axis Bank, HDFC Bank, State Bank of India (SBI), and YES Bank. All four banks are now operational on the TPAP, streamlining the process for Paytm to shift user accounts to these PSP banks,” the company said in a statement to stock exchanges.

What’s Ahead?

The RBI’s recent actions will significantly affect Paytm’s Business performance, apart from impacting the payments, these measures will impact the financial business of Paytm as the company also cross-sells financial products to platform users. Though the stock has corrected, it needs to be inspected how the company performs after such a significant impact on its Business.

Conclusion: The near-term expectations from the business do not look promising due to this major change in the business because of RBI’s actions, though it has received a nod from NPCI to onboard as a Third Party Application Provider. The upcoming few earnings will help determine the impact caused on the business due to the shutdown of Paytm Payments Bank.

The Paytm stock currently trades at Rs.393.30 a piece as of 18th April with a 52-week high and 52 52-week low of Rs.998.30 and Rs.318.05 respectively.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.