Shares of One 97 Communications, the parent firm of digital financial platform Paytm, cracked almost 15 percent to touch its fresh all-time low of ₹662.25 in intraday trade on BSE on March 14.
Shares of the company tanked after the Reserve Bank of India (RBI) barred Paytm Payments Bank by the regulator from onboarding new customers.
The RBI on March 13 ordered a temporary ban on the onboarding of new customers on Paytm Payments Bank. The parent firm One97 Communications assured that the RBI's ban will not impact any existing customers of payment banks which means existing customers can continue to do their transactions on the Paytm platform.
Existing users of Paytm UPI, Paytm Wallet, Paytm FASTag, and bank accounts can continue to use these instruments, including debit cards and net banking, for payments.
As per a report by Mint, RBI directed Paytm Payments Bank to halt its onboarding of new customers after noticing certain material supervisory concerns. The central bank directed the PPBL to also appoint an IT audit firm to conduct a comprehensive System Audit of its IT system. No new customers can join PPBL without specific permission granted by RBI after reviewing IT auditors' reports.
"The bank is taking immediate steps to comply with RBI directions, including the appointment of a reputed external auditor to conduct a comprehensive System Audit of its IT systems. PPBL remains committed to working with the regulator to address their concerns as quickly as possible," One97 said in a statement.
As per a Bloomberg report, the RBI barred Paytm Payments Bank from taking on new customers because it had allowed data to flow to servers abroad in violation of India’s rules. As per the report, RBI found that the company's servers were sharing information with China-based entities that indirectly own a stake in Paytm Payments Bank.
Shares of the company opened at ₹684.00 on BSE against the previous close of ₹774.80 and soon slipped to ₹662.25. Eventually, it closed 13 percent down at ₹675.35.
The stock is now 66 percent down from its all-time high of ₹1,961.05 on BSE.
Global brokerage firm Macquarie has an 'underperform' call on Paytm with a target price of ₹700. As per CNBC-TV18, the brokerage firm does not expect a significant impact of the RBI ban on the company's business as it has already onboarded a very large customer base onto its payments bank. However, the bank would have a significant impact on the brand and customer loyalty, Macquarie said.
The recent market volatility has triggered a selling in the stock. According to a MintGenie poll and an average of 8 analysts has a ‘hold’ call on the stock.
(The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.)