A day after the Reserve Bank of India (RBI) barred Paytm Payments’ Bank from taking deposits and doing credit transactions including top-ups in any customer accounts, wallets, FASTags, other instruments after February 29, the stock price of the associate company — One 97 Communication — hit the lower circuit of 20%.
The stock slumped 19.99% to Rs 609 on the National Stock Exchange. It fell 20% to its lower circuit limit of Rs 608.80 on the BSE. The company’s market capitalisation fell by Rs 9,666 crore to Rs 38,664 crore in early trade after many brokerages downgraded their rating on the stock.
“RBI’s actions directly impact the wallet business and profitability of merchant payments business, which can impact Ebitda by 20-30%,” Jefferies said in a report. The brokerage added that the impact on Paytm’s business will largely come from reputational concerns arising from governance/compliance and hence, the path to resolution will be from stronger compliance with regulations and revoking of RBI measures.
Ambuja Cements shares surge 4% after promoter sells 3% stake via block deal Market rally leads to higher regulatory fees for stock exchanges ONGC shares jump over 7%; brokerages maintain ‘buy’ call on stock Ola Electric IPO Opens Today: Check GMP, price band, and other key details
Also Read
In an analyst call on Thursday, Paytm parent One97 Communications said that it is working with partner banks for its payments and financial services business. Vijay Shekhar Sharma, founder and CEO, Paytm, made it clear that the company will bring down its dependence on associate Paytm Payments Bank.
“OCL and PPSL are already in process of moving nodal accounts to other banks, and marketing business services are not affected due to these directions,” Sharma said. President and Group Financial Officer Milind Deora said that the company will work with large banks and who also provide these services to other consumer companies.
On Wednesday, RBI directed the payments bank to stop accepting deposits or top-ups in any customer accounts, wallets, FASTags, other instruments after February 29. Also, it said that the nodal accounts of One97 Communications and Paytm Payments Services are to be terminated at the earliest, in any case not later than February 29.
In its notification, RBI said that the action on the company was due to persistent non-compliances and continued material supervisory concerns. In March 2022, the central bank had directed the payments bank to stop onboarding new customers. Additionally, RBI had directed the payments bank to appoint an income tax audit firm to conduct a thorough audit of its information technology system.
“Two years ago, the embargo was placed on onboarding new customers. We had already started to work with banks, and we will continue to decline and decrease dependency on PPBL,” Sharma said.
Also Read
In an exchange filing, the company highlighted the RBI action will have a worst case impact of Rs. 300 -500 crore on its annual earnings before interest, taxes, depreciation, and amortisation (Ebitda), going forward. However, the company’s profitability will continue to improve.
While there are no challenges to continue the lending business, the company has acknowledged that the RBI curbs are a material development, wherein all partner banks have questions and clarifications. The company’s management is engaging with partner banks to ensure that concerns are dealt with.
In the meantime, the payments bank is going to stop originating new loans for a few weeks till the operational issues are sorted. “We will ensure the least amount of disturbance to merchants. We will do whatever is the right approach in this matter,” says President and Chief Operating Officer Bhavesh Gupta.
Also Read
The company will now have to link its quick response (QR) codes to any other sponsored bank. Gupta acknowledges that this will be a significant exercise, and the new acquisition will immediately start in a week or two.
Nevertheless, the company’s management said that businesses like FASTag, payment gateway and point of sale will not see much disruption. While wallet is a popular, its impact to the the gross merchandise value is not significant.
“On the behalf of Paytm, this is more of a speed bump, but we believe in partnership of the banks and we will be able to see to the same in the next few days,” he said. Come from Sports betting site VPbet
