The Indian central bank on Wednesday, in a press release, ordered Paytm Payments Bank Ltd. (PPBL, or the bank) to stop new credit and deposit operations, debits, transfers and other such banking operations after February 29 this year. .
Also Read: Share price of Paytm locked at 20% lower circuit for second consecutive session
This was a big blow for the company, as the baby bank currently hosts over 330 million wallet accounts, playing a pivotal role in the Paytm ecosystem. According to analysts, the strict restrictions imposed are expected to hamper Paytm’s ability to retain customers.
The regulatory move prompted a major sell-off, marking one of the toughest periods for Paytm since its listing in November 2021. At its trading price of ₹487.20 per share, the stock is trading at a 77.34% discount compared to its issue price of ₹2,150 per, posing challenges for investors who entered the stock during the initial public offering and have maintained their positions till now.
At current levels, shares of One 97 Communications, Paytm’s parent company, are 11% away from hitting an all-time low of ₹438 per, affected in November 2022.
The stock has experienced a tumultuous journey over the last year, and the recent sharp decline has led brokerage houses to downgrade their ratings on Paytm shares, signaling more pain ahead. Amidst this backdrop, the company has seen its market cap fall ₹30,888 crores of ₹48,247 crore (taking Wednesday’s closing price of ₹761 per one count).
Also Read: ‘Your money is safe’: Paytm Payments Bank assures customers via email, text
According to the latest BSE stock data, mutual funds held approximately 3,16,64,315 shares, constituting a 4.99% stake in Paytm at the end of the December quarter of FY24. The sharp drop in the stock resulted in a ₹869 crore loss for the mutual funds.
The most important ownership of the company lies with foreign institutional investors (FIIs), holding an investment of more than 63.7%, and retail investors, making up 30.2%. FII and retail investors incurred losses of ₹11,000 crore and ₹5,332 crore, respectively.
Also Read: Paytm sees ₹300-500 cr Ebitda impact after RBI crackdown on payments bank
Interestingly, just three weeks before the Reserve Bank of India imposed restrictions on Paytm, the SoftBank unit SVF India Holdings carried out open market transactions, selling 12,706,807 equity shares of Paytm, thereby reducing its stake to 5.01%.
Softbank has cut its stake in the company over the past few quarters. Earlier in November 2023, Warren Buffett’s Berkshire Hathaway, or BH International, sold its entire 2.46% stake in the company, reserving a loss of ₹507 crore on its initial investment made five years ago.
Disclaimer: We advise investors to check with certified experts before making any investment decisions.
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Published: 02 Feb 2024, 16:25 IST
(tagsTo Translate)Paytm