RBI ‘ban’ on Paytm Payments Bank: Stock trades nearly 80% lower than the IPO price

The Indian central bank on Wednesday, in a press release, directed Paytm Payments Bank Ltd. (PPBL, or the bank) to stop new credit and deposit operations, top-ups, fund transfers, and other such banking operations after February 29 this year.

Also Read: Paytm share price locked at 20% lower circuit for second consecutive session

This was a big blow to the company, as the payment bank currently hosts over 330 million wallet accounts, playing a pivotal role in Paytm’s ecosystem. The stringent restrictions imposed are anticipated to hinder Paytm’s ability to retain customers, according to analysts.

The regulatory move prompted a significant sell-off, marking one of the most challenging periods for Paytm since its listing in November 2021. At its trading price of ₹487.20 apiece, the stock is trading at a 77.34% discount compared to its issue price of ₹2,150 apiece, posing challenges for investors who entered the stock during the initial public offering and have maintained their positions to date. 

At current levels, the stock of One 97 Communications, Paytm’s parent firm, is 11% away from hitting an all-time low of ₹438 apiece, touched 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. Amid this backdrop, the company saw its market cap drop to ₹30,888 crore from ₹48,247 crore (taking Wednesday’s closing price of ₹761 apiece into account).

Also Read: ‘Your money is safe’: Paytm Payments Bank assures customers in email, text

As per the latest BSE shareholding 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 stock’s sharp fall has resulted in a ₹869 crore loss for the mutual funds.

The major ownership of the company lies with foreign institutional investors (FIIs), holding a stake of over 63.7%, and retail investors, constituting 30.2%. FIIs and retail investors have 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 entity SVF India Holdings executed open market transactions, selling 12,706,807 equity shares of Paytm, thus reducing its stake to 5.01%.

Softbank has been cutting its stake in the company over the last few quarters. Earlier in November 2023, Warren Buffett’s Berkshire Hathaway, or BH International, sold its entire 2.46% stake in the company, booking 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.

Milestone Alert!
Livemint tops charts as the fastest growing news website in the world 🌏 Click here to know more.

Here’s your comprehensive 3-minute summary of all the things Finance Minister Nirmala Sitharaman said in her Budget speech: Click to download!

Published: 02 Feb 2024, 04:25 PM IST