Paytm Shares Plummet 43% in 3 Days, Investors Lose Rs 20,500 Crore; Analysts Recommend Exploring Alternatives

Paytm shares crashed 48.7 points or 10 per cent to Rs 438.5 on Monday morning. The stock was locked in 20 per cent lower for two consecutive days, which resulted in a $2 billion loss in mcap at the bourses

Shares of One97 Communications, parent company of Paytm, fell another 10 per cent hitting a lower circuit on Monday, February 5. The stock has fallen over 40 per cent in the last three sessions after the Reserve Bank of India (RBI) imposed sweeping curbs on the company’s payments bank business.

On January 31, the central bank barred Paytm Payments Bank Limited (PPBL) from accepting deposits or top-ups in any customer account, prepaid account, wallet, or FASTags after February 29, 2024.

On Sunday, Paytm's parent denied any investigation by the Enforcement Directorate (ED) on One97 Communications, associates, or founder Vijay Shekhar Sharma for anti-money laundering activities.

Paytm stock crashed 48.7 points or 10 per cent to Rs 438.5 on Monday morning. Stock exchanges BSE and NSE have changed the circuit limits to 10 per cent for the stock, as per the circulars. Paytm was locked in 20 per cent lower for two consecutive days, which resulted in a nearly Rs 20,500 crore loss in mcap at the bourses.

“Neither the company nor its founder and CEO are being investigated by the Enforcement Directorate regarding inter alia money laundering”, the company said in an exchange filing.

Brokerage firms have sharply cut Paytm stock ratings and target prices. Jefferies downgraded the stock to ‘Underperform’ and cut its target price to Rs 500 per share. Macquarie slashed its target price to Rs 650.

According to analysts, investors should look for better alternatives in the market and suggested to avoid rumors until further clarity emerges.

Ashish Chaturmohta, PMS Fund Manager and Executive Director at JM Financial Ltd says the regulatory action on Paytm is bad news for the investors. There’s no point in trying to catch a falling knife when you have other alternatives that look more promising within the financial space.

“Paytm is a new business and a lot of new-age companies are turning EBITDA positive but it's better to switch to names that have a clear trajectory in terms of profitability. If one wants to really look into the new age businesses, or the financial services segment then there are better alternatives available which one can pick instead Paytm,” Chaturmohta said.

Paytm reported a 38 per cent year-on-year (YoY) increase in revenue for the October-December quarter of FY24. Its consolidated net loss narrowed to Rs 220 crore compared to Rs 392 crore in the year-ago period. The fintech major has not posted a net profit since it went public in November 2021.

Kranthi Bathini, Director at WealthMills Securities says as the stock is in the corrective mode, investors should avoid the stock at this point of time until more clarity emerges on the ongoing regulatory action.

“Investors who already invested can hold on and wait for further clarity. One should avoid reacting to all the rumors that are coming right now and the stock is also not trading right now. It is in the lower circuit so there is no option to exit also,” Bathini said.

According to a Bloomberg report, the RBI was considering canceling the license of Paytm Payments Bank as early as next month.

In addition, traders’ body Confederation of All India Traders (CAIT) issued a cautionary advice urging Paytm users to switch to other payment apps.

"The Reserve Bank of India has imposed certain restrictions, prompting CAIT to recommend that users take proactive measures to protect their funds and ensure uninterrupted financial transactions. A large number of small traders, vendors, hawkers, and women are making payments through Paytm and as such RBI restrictions on Paytm could lead to financial disruption to these people," it said.

Traders are advised to use payment platforms other than Paytm for business-related transactions, CAIT noted.

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