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Paytm exhibits volatility day after Vijay Shekhar Sharma exits PPBL board

Vijay Shekhar Sharma on Monday stepped down as part-time non-executive Chairman of Paytm Payments Bank Limited (PPBL).

Vijay Shekhar Sharma, Paytm Founder

Photo: Bloomberg

SI Reporter Mumbai

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Shares of One97 Communications (OCL), which provides financial services under the Paytm brand, and its banking arm Paytm Payments Bank (PPBL), traded on a volatile note  a day after Vijay Shekhar Sharma stepped down as part-time non-executive Chairman of PPBL.

Amid the volatility, the stock hit the 5 per cent for the third straight day at Rs 449.30 on the BSE in Tuesday's trade at 09:23 AM. In doing so, the stock of the fintech company had rebounded by 9 per cent from its intra-day low of Rs 413.55. However, at 09:46 am; the stock again quoted 1 per cent lower at Rs 423.85, as compared to 0.06 per cent rise in the S&P BSE Sensex.

The counter has seen huge trading volumes with a combined 13.7 million equity shares changing hands on the NSE and BSE.

With today's intra-day gain, the stock price of Paytm has recovered 41 per cent from its record low of Rs 318.05 touched on February 16, 2024. It had hit a 52-week high of Rs 998.30 on October 20, 2023.

One97 Communications (Paytm) is India's leading digital ecosystem for consumers and merchants. It offers payment services, commerce and cloud services, and financial services (mainly loan distribution) to 33.3 crore consumers and over ~2+ crore merchants.

OCL on Monday after market hours announced its associate, Paytm Payments Bank Limited (PPBL), has reconstituted its Board of Directors with the appointment of Ex-Central Bank of India Chairman Srinivasan Sridhar, retired IAS officer Debendranath Sarangi, former Executive Director of Bank of Baroda Ashok Kumar Garg, and former IAS officer Rajni Sekhri Sibal. Vijay Shekhar Sharma has stepped down as part-time non-executive Chairman of PPBL.

The Reserve Bank of India (RBI) has barred the PPBL from accepting deposits and credits from any customer post-March 15 for persistent non-compliances and continued material supervisory concerns in the bank.

In another development, the RBI asked the National Payments Corporation of India (NPCI), in post stock market hours on Friday, to look into the possibility of migrating PPBL customers, using the UPI handle '@paytm', to four-to-five other banks.

This move, most analysts believe, will smoothen the transition out of PPBL to other partners. While the objective could be to limit inconvenience to users, PayTM would see a minimal limited volume loss.

RBI’s clarification that @paytm UPI handles can be seamlessly migrated to other banks (if NPCI grants TPAP approval to Paytm) resolves a major unknown for the company. If Paytm is able to smoothly transition a majority of UPI users, and resume lending products with limited disruption, we see an implied value per share of Rs 750, Goldman Sachs said.

However, the brokerage firm does expect some user and merchant share loss in the interim due to increased competitive intensity, and note that visibility on ramp up of lending (including status of partners) remains low. “In our base case, we assume Paytm’s monthly transacting users (MTU) base declines to 80-85 million in FY25, versus around 100 million at present,” Goldman Sachs said.

The latest developments are a big positive for Paytm. RBI solving for customer/merchant convenience increases our conviction on the assumption of a smooth transition out of PPBL to other partners. While the objective could be to limit inconvenience to users, the “side-effect” would be limited volume loss for Paytm, the brokerage firm Bernstein said.

One of the reasons for the announced steps is to 'minimize concentration risk in UPI system by having multiple payment app providers' - a recognition that should reduce questions on whether RBI's original actions were against PPBL or Paytm app, it added.

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First Published: Feb 27 2024 | 10:05 AM IST

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