Paytm shares slump after India bars payments bank from signing up new customers
Sign up now: Get ST's newsletters delivered to your inbox
Paytm made its debut in November last year in the country's biggest-ever initial public offering.
PHOTO: REUTERS
DeeperDive is a beta AI feature. Refer to full articles for the facts.
BENGALURU (REUTERS) - Shares of Indian digital payments firm Paytm, formally known as One97 Communications, tumbled more than 13 per cent on Monday (March 14), after the central bank barred the company's payments bank from taking on new customers and ordered an audit of its information technology systems.
The Reserve Bank of India (RBI) said on Friday it would allow Paytm Payments Bank (PPB) to take on new customers subject to specific permission after reviewing the IT auditor's report.
PPB had received the central bank's approval in December to function as a scheduled payments bank, helping it expand its financial services operations.
Paytm made its debut in November last year in the country's biggest-ever initial public offering. But the listing was also one of the worst witnessed by the Indian stock market. Including Monday's losses, Paytm shares have fallen more than 65 per cent since their debut.
Analysts at ICICI Securities said the digital payments start-up would have to increase its efforts to enhance engagement with the existing user base to offset any adverse impact of the embargo on new users.
"Now, expecting moderation in onboarding of new users and the adverse impact on incremental payment revenue... we revise our target price to 1,285 rupees (earlier 1,352 rupees)," the research firm said, adding that the company might defer its plan to apply for a conversion into a small finance bank.
Analysts at Macquarie Research expect a significant impact on Paytm's brand and customer loyalty. They said the recent developments would substantially lower the chance of PPB upgrading to a small finance bank.
Business news website Moneycontrol had reported last week that PPB was likely to apply to the RBI for a small finance bank licence by June, when it completes five years of operations.
Paytm shares were down 11.9 per cent at 682.85 rupees, as at 12.30pm Singapore time, in a stronger Mumbai market, which was up about 0.4 per cent.
