Shares of Paytm saw a modest gain of over 2 per cent on the BSE on Tuesday, following the announcement of significant developments within the company. Vijay Shekhar Sharma, the founder and CEO of Paytm, on Monday evening took a pivotal step by resigning from his position to assist in the restructuring of the Board of Paytm Payments Bank Ltd (PPBL). As the market opened at 9:30 am, the stock was observed trading at Rs 433.30, reflecting initial positive sentiment among investors.
At 12.30 pm, shares of One 97 Communications, the parent firm of Paytm, are trading at Rs 437.05 apiece, up 2.13 per cent on the BSE.
Sharma's decision comes amidst escalating regulatory challenges faced by PPBL. The Reserve Bank of India (RBI) recently mandated restrictions on PPBL, prohibiting the bank from accepting deposits and credits from customers beyond March 15. This directive was issued due to persistent non-compliances and ongoing material supervisory concerns within the bank.
In response to these regulatory hurdles, brokerage firm Macquarie has issued an 'underperform' rating on Paytm stock, setting a target price of Rs 275 per share. This projection suggests a 35 percent downside from the closing price of Rs 478 recorded on February 26. Notably, Paytm shares have already witnessed a significant decline, losing 44 per cent of their value since the RBI imposed restrictions on PPBL on January 31.
Macquarie analysts interpret Sharma's resignation as a strategic move aimed at signalling to regulators his willingness to relinquish control of Paytm Payments Bank. Currently, Sharma owns 51 per cent of the bank. Despite the potential for increased profitability if PPBL resumes operations, highlighted by its Rs 2.44 crore profit in FY23, analysts caution against expectations of RBI authorising any related-party transactions between Paytm and Paytm Payments Bank in the future.
The developments within Paytm underscore the pressing need for regulatory compliance and structural reforms within the organisation, as it navigates through challenging regulatory terrain while aiming to restore investor confidence and operational stability.