In a noteworthy development, Paytm witnessed a 10% surge in its shares on Wednesday following reports of the CEO engaging in discussions with Finance Minister Nirmala Sitharaman and the Reserve Bank of India (RBI). These talks aim to navigate through a regulatory crackdown on Paytm’s payments bank business.
The shares of Paytm reached as high as 496.25 rupees, although they still remain significantly below their value before January 31. This decline resulted from the RBI’s directive ordering Paytm Payments Bank to cease accepting new deposits in both its accounts and digital wallets from March, citing supervisory concerns and non-compliance with regulations.
Tuesday’s reports on discussions with government and central bank officials had already contributed to gains, indicating a potential positive trajectory for the company. A source with direct knowledge of the talks disclosed that efforts are underway to address regulatory concerns and compliance issues with both the RBI and the ministry.
Seeking an extension of the February 29 deadline from the RBI, Paytm is also seeking clarity on the transfer of its license for the wallets business and the digital highway toll payment service FASTag. Despite ongoing compliance issues, the CEO’s engagement with regulators has instilled some confidence among investors.
Kranthi Bathini, Equity Strategist at WealthMills Securities, acknowledged that while compliance challenges persist, the recent stock correction might present a buying opportunity. However, shares of the company are still trading approximately 24% below the median price target of 650 rupees, as reported by 14 analysts according to LSEG data.
Pranav Gundlapalle, Senior Analyst at Bernstein, emphasized the significance of Paytm’s payment operations and the potential inconvenience to customers and merchants in the event of a sudden shutdown of payments bank operations. Efforts are being made to ensure a smooth transition away from dependency on Paytm Payments Bank Ltd.