Amid mounting regulatory concerns, the shares of fintech giant One 97 Communications, parent company of Paytm, took another hit, plummeting by 5% to reach a new all-time low of Rs 325.30 on BSE. This decline comes in the wake of the Directorate of Enforcement (ED) interrogating officials of Paytm Payments Bank regarding alleged Foreign Exchange Management Act (Fema) violations by entities utilizing the bank’s services.
Paytm’s Value Erodes
Over the past 11 days, Paytm has witnessed a staggering erosion of its market value, amounting to approximately Rs 27,000 crore or 57%. The turmoil ensued following the Reserve Bank of India’s ban on Paytm Payments Bank, which also houses the Paytm wallet.
In a recent exchange filing, Paytm acknowledged the receipt of notices and requisitions from ED, seeking information and explanations regarding customers possibly involved with the implicated entities. Notably, Paytm clarified that its associate, Paytm Payments Bank Limited, does not engage in Outward Foreign Remittance.
ED’s Investigation
Reports indicate that executives from Paytm cooperated with ED, providing the requested information and documents. However, ED has requested further details to be furnished by the following week. Despite the ongoing investigation, a government official, speaking anonymously, disclosed to ET that the gathered information and documents do not currently indicate Fema violations.
Investor Caution
Given the persistent downward trend in Paytm shares, experts advise caution to retail investors until regulatory uncertainties are resolved. Speculations regarding the potential revocation of Paytm Payments Bank’s license by RBI have added to the apprehension among investors.
Global brokerage firm Macquarie has expressed a bearish outlook on Paytm, projecting a further decline in stock value to as low as Rs 275. Analysts highlight the challenges associated with migrating payment bank customers and related merchant accounts to alternative banking platforms within RBI’s stipulated deadline.
Market Response
Market experts caution against attempting to ‘catch a falling knife,’ emphasizing the volatility and uncertainty surrounding Paytm’s business operations in light of regulatory directives. Sudip Bandyopadhyay of Inditrade Capital underscores the erosion of customer and partner confidence, emphasizing the imperative need for remedial actions to restore trust and stability.
FAQs
Why are Paytm shares plummeting?
Paytm shares are declining due to regulatory scrutiny and concerns regarding alleged Fema violations by entities associated with Paytm Payments Bank.
What impact has the recent ED investigation had on Paytm?
The investigation by the Directorate of Enforcement has intensified regulatory pressure on Paytm, leading to further uncertainty among investors.
Should retail investors consider investing in Paytm amidst regulatory challenges?
Experts advise caution, recommending investors to wait until regulatory uncertainties surrounding Paytm are resolved before considering investment.
What challenges does Paytm face in light of RBI’s directives?
Paytm confronts challenges in migrating payment bank customers and merchant accounts to alternative banking platforms within the stipulated deadline set by the RBI.
How has market sentiment responded to the ongoing turmoil surrounding Paytm?
Market sentiment remains cautious, with investors wary of the volatility and uncertainties surrounding Paytm’s business operations amidst regulatory scrutiny.
