What next for Paytm? 

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Following RBIs order barring Paytm (One 97 Communications) from accepting deposits and top-ups in wallets, Paytm Payments bank and FASTags starting February 29th, the share dipped 20% lower as markets opened on Thursday. Notably, the decision came in light of “continued material supervisory concerns in the bank, which warranted further supervisory action”, as per RBI. The share is currently trading at Rs 609. The stock reached a 52-week high of Rs 998 on 20th October, 2023. Under section 35A of the Banking Regulation Act, 1949, RBI has effectively stopped Paytm from taking on any deposits effective March 2024. In October 2023, RBI had imposed penalties worth Rs 5.39 crore on Paytm Payments Bank

Notably, Paytm is expected to comply with the orders, and expects a worse-case impact of anywhere between Rs 300-500 crores in EBTIDA. The company, in which promoter Vijay Shekhar Sharma holds a 51% stake, reiterated that Sharma had not taken any margin loans or pledged his shares.

Experts are bearish on Paytm, advising investors to stay put before finding any investment opportunities in the share. However, it was mainly Jefferies that dropped the hammer on Paytm. Jefferies reduced its target price from Rs 1050 to Rs 500 and also pulled down its rating from buy to under perform. Meanwhile Macquaire and Citi maintained their target and rating. Macquaire gave neutral ratings with Rs 650 target price and Citi has Rs 900 target price with neutral ratings.

Another major impact can be visible in onboarding new customers via FASTags business, where Paytm happens to be the 3rd largest player. Going ahead, Paytm also indicated that it will partner with multiple external banks so as to avoid disruption of services.

In its statement, Paytm maintained that other services, like UPI, Paytm Money were not affected, and will continue to run as before. However, those having Paytm Payments Bank as their default bank account for investing via Paytm Money will have to add another account, since the bank wont be accepting any deposits post February. Notably, withdrawals will be permitted. So, all balances in Paytm wallets and FASTags will continue unhindered. However, no new top-ups will be allowed.