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Paytm's Stock plunges 5 Percent, Investors lose Rs 27,000 Crore in 11 days
One 97 Communications, a fintech company, experienced a 5% decline in its shares, hitting a record low of Rs 325.30 on the Bombay Stock Exchange. This drop followed questioning by officials from the Directorate of Enforcement (ED) of Paytm Payments Bank officials regarding alleged Foreign Exchange Management Act (FEMA) violations by entities utilizing the bank. Reports indicate that over the past 11 days, Paytm has witnessed a loss of approximately Rs 27,000 crore or 57% of its value since the Reserve Bank of India (RBI) imposed a ban on the payments bank, which also houses the Paytm wallet.
In a recent disclosure, One 97 Communications confirmed that it has been receiving notifications and inquiries from the ED regarding customers who may have transacted with these entities, requesting information, documents, and clarifications. The company specified that its affiliate, Paytm Payments Bank Limited, does not participate in outbound foreign remittances.
Reports indicate that ED executives have furnished the information and documents requested by the agency and have been instructed to provide additional details by the upcoming week. A senior government official, speaking anonymously, mentioned that based on the information and documents provided by Paytm Payments Bank, there are currently no indications of FEMA violations.
Retail investors are being cautioned by experts to avoid investing in Paytm shares until the regulatory challenges are addressed. Additionally, there are reports suggesting that the RBI is contemplating the possibility of revoking the license of Paytm Payments Bank. Macquarie, a global brokerage firm, has forecasted a potential decline in the stock price to as low as Rs 275, presenting the most pessimistic outlook on Paytm.
According to Macquarie analyst Suresh Ganapathy, revenue estimates have been substantially lowered, anticipating a decline of 60-65% in both payment and distribution business revenues by FY25/26E. The transfer of payment bank customers and associated merchant accounts to other banks will necessitate conducting Know Your Customer (KYC) verifications once more, presenting a formidable challenge within the RBI's deadline of February 29th.
Investors who have sought to invest in Paytm amidst its downturn have encountered notable losses. Sudip Bandyopadhyay from Inditrade Capital highlighted that the ambiguity regarding the payments bank's operations resulting from RBI interventions has diminished both customer and partner trust. Consequently, customers and partners are advocating for a transition to alternative choices.
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