Paytm at near record low. Investors lose ₹20,500 crore

Shares of troubled fintech One 97 Communications or Paytm fell another 10% on Monday to its lower circuit limit at Rs 438.35 on BSE as the regulatory crisis deepened with fresh allegations of money laundering and investigation by the Directorate of Enforcement (ED) coming to the fore. In the last 3 trading sessions, including today, the stock has lost 42.4% of its value or Rs 20,500 crore in market capitalisation.

Following two successive days of 20% losses in Paytm, stock exchanges have reduced the lower circuit limit to 10%.

“One should avoid bottom fishing at this juncture because the news flow is still not digested by the market at this moment. Those who are still stuck in the stock are willing to exit,” said Rajesh Palviya of Axis Securities.

Brokerages, who were bullish on Paytm following its path to profitability, have been screaming sells as the fintech’s arm Paytm Payments Bank is seen facing an existential crisis following RBI’s ban on January 31.

Since then, it has been reported that Paytm has been facing ED investigation since 2021 over alleged money laundering and illegal betting.

Paytm, which hasn’t been booked yet in any of the money laundering cases, has denied any ED investigation on money laundering.

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“Neither the company nor its founder and CEO are being investigated by the Enforcement Directorate regarding inter alia money laundering. In the past, certain merchants/users on our platforms have been subject to enquiries and on those occasions, we have always cooperated with the authorities. During any such investigations by the authorities on any set of merchants/users in the past, we have cooperated with them on these investigations,” Paytm said in a clarification last night.

ET had earlier reported that RBI alerted ED a few months ago about possible money laundering and know-your-customer (KYC) violations at Paytm. RBI’s diktat is being seen as being culminating into cancellation of payments bank licence.

Paytm Payments Bank, which is 49% owned by Paytm, has been directed by RBI to discontinue most of its operating functions (deposit, PPI, wallet, Fastag, BBPOU, UPI) by end of 29th Feb’24. It has also asked PPBL to not engage with Paytm’s other business units for Nodal accounts.

Macquarie said the revenue and profitability implications of the RBI ban could be significant in the medium to long term. “Given the severe restrictions imposed on PBPL, we believe it significantly hampers Paytm’s ability to retain customers in its ecosystem, and accordingly restricts it from selling payment products and loan products,” Macquarie’s Suresh Ganapathy said.

Jefferies analysts have warned that Paytm’s business impact will also come from reputational concerns arising from governance/ compliance and lending business will face challenges.

While the company management has guided that the regulatory trouble could impact EBITDA by Rs 300-500 crore (which is 20-30% of FY25 earnings), Jefferies analysts say the hit could be higher at 45% as there could be an additional 20% hit from a sustained lending business slowdown.

On its part, Paytm said it will pursue partnerships with various other banks, to offer various payment products to its customers.

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Harry Byrne

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