Introduction: In the aftermath of demonetization in 2016-17, Paytm emerged as a market disruptor with its clever campaigns and user-friendly app. Fast forward to 2024, Paytm faces challenges as RBI restrictions impact its payments bank, resulting in a substantial stock decline. This article delves into the events leading to this scenario, including strategic investments and Paytm’s resilient stance.
In 2016-17, Paytm made a huge impact on the market right after the demonetisation on November 08, 2016. They even released a full-page print ad congratulating the Prime Minister, with a clever play on words using their tagline ‘Ab ATM nahin, #Paytm karo’. They also simplified the process of using the app for new users.
Paytm Payments Bank has been strictly prohibited by the Reserve Bank of India (RBI) from accepting any deposits or top-ups in any customer account, wallets or FASTags after February 29. The RBI has cited Section 35A of the Banking Regulation Act, 1949, and has instructed that the Nodal Accounts of One97 Communications and Paytm Payments Services Ltd. should be terminated immediately. This move could potentially reduce revenue from the company’s main payments business. The company expects an annual EBITDA impact of ₹300 to ₹500 crores.
On February 5, Paytm stock fell another 10 per cent, hitting the lower circuit once again. This brings its total fall to over 42 per cent in the last three sessions. Paytm stock has been experiencing consecutive lower circuits since RBI curbs were imposed on its payments bank unit. As of Monday morning, the stock has fallen from Rs 761.4 to Rs 438.5.
On Friday, Morgan Stanley Asia (Singapore) Pte – ODI, an affiliate of the financial services giant, made a strategic move by purchasing 50 lakh shares of Paytm’s parent company, One97 Communications, on the NSE. This acquisition represents a 0.8% stake and was made at an average price of Rs 487.20 per share, resulting in a deal size of Rs 243.60 crore.
During the ongoing crisis, Vijay Shekhar Sharma, the founder and CEO of Paytm, has announced that the company will not conduct any layoffs. In addition, he stated that the company is collaborating with other banks to form partnerships, intending to shift its affected operations from PPBL.
Conclusion: Despite facing a sharp decline in its stock value and RBI restrictions on its payments bank, Paytm remains resilient. The strategic investment by Morgan Stanley and the CEO’s commitment to no layoffs demonstrate the company’s determination to navigate challenges. As Paytm explores partnerships with other banks, it anticipates a shift from its affected operations, showcasing adaptability during this evolving phase.
Author Bio
