Paytm’s Share Price Drops 42% in Three Days, Resulting in a Loss of Rs 20,500 Crore for Investors

On Monday, shares of Paytm’s parent company, One 97 Communications, fell 10% to hit the lower circuit limit of Rs 438.35 on the Bombay Stock Exchange. The regulatory challenges for the troubled fintech company have intensified, with new accusations of money laundering and an ongoing investigation by the Directorate of Enforcement.

In the last three trading sessions, including today, the stock has witnessed a significant 42.4% decline, translating to a loss of Rs 20,500 crore in market capitalization.

After two consecutive days of 20% losses in Paytm, stock exchanges have adjusted the lower circuit limit to 10% .

Rajesh Palviya from Axis Securities cautions against bottom fishing now, suggesting that the market is still processing the news. Existing stockholders are contemplating exits.

Brokerages, once optimistic about Paytm’s journey to profitability, have now become pessimistic due to the crisis faced by Paytm Payments Bank following the RBI ban on January 31.

Paytm also witnessed 19.4 lakh shares exchanged in a pre-market significant transaction, as per Bloomberg data. The identities of the buyers and sellers remain undisclosed. Following major supervisory concerns and ongoing non-compliance issues with the company’s payment banks, the Reserve Bank of India imposed restrictions on Paytm Payments Bank, barring fresh deposit or credit transactions from Feb. 29.

 In response, One97 Communications announced its intention to collaborate solely with other banks, distancing from its own payment banks.

Adding to the company’s challenges, media reports suggested an ongoing investigation by the enforcement directorate into alleged money laundering activities.

Reports suggest that Paytm has been under investigation by the Enforcement Directorate (ED) since 2021 for alleged involvement in money laundering and illegal betting. However, Paytm has consistently denied any ED investigation related to money laundering.

In a recent clarification, Paytm affirmed, “The company and its founder and CEO are not under investigation by the Enforcement Directorate for money laundering or related matters. While some merchants/users on our platforms have faced inquiries in the past, we have consistently cooperated with the authorities. In all instances of investigations involving merchants/users, we have collaborated with the authorities.”

The company’s shares dropped by 10% to Rs 438.50 each, hitting the lower circuit, while the NSE Nifty 50 Index showed a modest 0.13% increase.

The stock has experienced a 21.46% decline in the last 12 months. The current traded volume for the day is 11 times higher than its 30-day average.

“The recent regulatory actions by the RBI will have a significant impact on Paytm’s business performance. While the regulator had previously limited new customer onboarding at PPBL, the latest measures go further, prohibiting PAYTM from conducting any credit or deposit transactions after February 29, 2024. Besides affecting payments, these measures will also impact Paytm’s financial business, given the company’s cross-selling of financial products to platform users,” stated Motilal Oswal Securities.

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