Shares of fintech behemoth Paytm fell more than 13% to an all-time low of Rs 672.10 after the Reserve Bank of India (RBI) directed Paytm Payments Bank to immediately cease opening new accounts due to “material supervisory concerns” in the bank.
The stock is currently trading 65% lower than its all-time high of Rs 1,961.05. It opened 12% lower at Rs 684, compared to the previous close of Rs 774.80 on the BSE. During early trade hours on the BSE, the company’s market cap fell below Rs 45,000 crore.
The stock has been on a downward trend and has dropped more than 49% year to date. The stock is trading below its five-day, twenty-day, fifty-day, hundred-day, and two-hundred-day moving averages.
The Reserve Bank of India (RBI) directed Paytm Payments Bank to stop onboarding new customers on its platform with immediate effect in an official order issued on Friday. The bank has also been directed to hire an IT audit firm to conduct a thorough System Audit of its IT system.
According to the statement, this action is based on “certain material supervisory concerns observed in the bank.”
“Paytm Payments Bank Ltd’s onboarding of new customers will be subject to specific permission to be granted by RBI after reviewing the report of the IT auditors,” the central bank said in a statement.
Paytm stated that it has been informed that the RBI’s action has no effect on any existing PPBL customers, who can continue to use all banking and payment services as usual.
“All existing Paytm UPI, Paytm Wallet, Paytm FASTag, and bank account users can continue to use these instruments for payments, including debit cards and net banking,” it said.
“The bank is taking immediate action to comply with the RBI’s directives, including the hiring of a reputable external auditor to conduct a comprehensive system audit of its IT systems. PPBL remains committed to collaborating with the regulator in order to address their concerns as soon as possible “Furthermore, the company added.
“We expected Paytm’s consumer base to grow by 10% in FY23E, with monthly transacting users increasing at a rate of more than 25%. To offset the negative impact of the embargo on new users, the company will need to increase its efforts to increase engagement with its existing user base “It stated.
“Now, we revise our target price to Rs 1,285 because we anticipate a slowdown in new user onboarding and a negative impact on incremental payment revenue (as wallets are key monetizable payment instruments) (earlier Rs 1,352). It may also postpone Paytm Payments Bank’s plan to apply for conversion into a small finance bank (though it is eligible to apply as of May 22) “ICICI Securities was also added.
Paytm Payments Bank was founded in August 2016 and began operations in May 2017 with a branch in Noida.
As of March 31, 2021, Paytm Payments Bank had 64 million savings accounts and over Rs 5,200 crore in deposits. It was also the largest beneficiary bank for the Unified Payments Interface, with the lowest technical decline rate among beneficiary and remitter banks.
One 97 Communications, led by Vijay Shekhar Sharma, made a shaky debut on November 18 of last year. The stock was listed on the NSE at a 9.30% discount to the issue price of Rs 2,150 per share, at Rs 1,950.