Paytm share price today: One 97 Communications plunges 8% after RBI cancels Paytm Payments Bank’s banking licence.; what’s the outlook?
Paytm share price today: Shares of One 97 Communications, the parent of fintech platform Paytm, dropped as much as 8 per cent on Monday, falling to an intraday low of Rs 1,057 on the National Stock Exchange. The sharp decline came after the Reserve Bank of India revoked the banking licence of Paytm Payments Bank, prompting the company to announce the closure of its banking subsidiary.In a stock exchange filing issued after market hours on Friday, Paytm said the RBI had effectively withdrawn Paytm Payments Bank’s licence. The company emphasised that it has no operational or financial exposure to the associate entity and does not offer any services jointly with it. It also clarified that Paytm Payments Bank has functioned as an independent entity.Paytm said that there would be no direct financial impact on One 97 Communications, noting that its investment in Paytm Payments Bank had already been fully impaired as of March 31, 2024.The company also sought to reassure users and investors that all Paytm services will continue without disruption. These include the Paytm app, Paytm UPI, Paytm Gold, and offerings provided through its subsidiaries and affiliates, such as Paytm QR, Paytm Soundbox, Paytm Card Machines, Paytm Payment Gateway, and Paytm Money.
Why did RBI cancel Paytm Payments Bank license?
The RBI’s decision follows more than two years of regulatory scrutiny and operational restrictions, including a ban on accepting fresh deposits in 2024. Paytm Payments Bank had received its payments bank licence in August 2015, allowing it to accept limited deposits but not extend loans.The central bank said the bank’s operations had become detrimental to depositors and contrary to public interest. It cited compliance shortcomings, including deficiencies in customer due diligence, governance concerns, and issues related to the management’s conduct. According to the RBI, allowing the bank to continue operations would serve neither public interest nor any useful purpose, an ET report said.Subsequently, on Saturday, Paytm announced that the board and shareholders of Paytm Payments Bank had approved the necessary resolutions to initiate the winding-up process.The company reiterated that the closure of Paytm Payments Bank and the resulting end of its associate relationship are not expected to materially affect One 97 Communications’ business operations, financial position, or overall performance. It added that all of its businesses will continue to function independently and in full compliance with applicable laws and regulations.
Paytm share price : What’s the outlook?
According to Bernstein quoted in the ET report, the Reserve Bank of India’s decision to revoke the banking licence of Paytm Payments Bank is likely to have a mildly negative impact on its parent, One 97 Communications. The brokerage noted that the language used by the regulator in its communication was notably stern and raised concerns.Despite this, the Societe Generale Group-backed brokerage has maintained its ‘Outperform’ rating on Paytm, with a target price of Rs 1,500. This suggests a potential upside of about 31 per cent from the stock’s previous closing level.Bernstein pointed out that although Paytm holds a 49 per cent stake in Paytm Payments Bank, it has had no role in the bank’s current management or board. Even so, the firm said the regulator’s strongly worded observations cannot be overlooked, especially given the company’s history of regulatory challenges.The brokerage also noted that after the RBI imposed restrictions on Paytm Payments Bank in early 2024, the company took substantial steps to sever operational linkages between the bank and its core business. These measures included reconstituting the bank’s board and making efforts to position the entity for a potential revival.Bernstein does not expect any immediate impact on Paytm’s existing business operations or financial performance. It highlighted that Paytm Payments Bank’s operations have effectively remained suspended for over a year, and that a clear separation between the bank and the parent company has already been established following the regulatory action.The brokerage further believes that this development could pave the way for Paytm to seek an NBFC or Prepaid Payment Instrument licence. Securing such approvals could allow the company to expand its offerings in areas such as digital wallets and certain credit products.Meanwhile, Goldman Sachs has reaffirmed its ‘Buy’ recommendation on Paytm, while trimming its target price to Rs 1,400 per share from the earlier Rs 1,470. Even at the revised level, the target indicates a potential upside of nearly 31 per cent from the stock’s previous closing price.The global brokerage views the Reserve Bank of India’s decision to revoke the banking licence of Paytm’s associate entity as a marginal negative development. However, it believes the move will not have any direct financial impact on the company.According to the brokerage, the primary concern lies in the possibility that the development could affect the sentiment of customers and merchants.Goldman Sachs noted that while this issue may weigh on the stock in the near term, Paytm’s underlying business fundamentals and operating momentum remain firmly in place.(Disclaimer: Recommendations and views on the stock market, other asset classes or personal finance management tips given by experts are their own. These opinions do not represent the views of The Times of India)
