Paytm stock price today: According to Macquarie, the RBI’s action essentially amounts to the central bank rescinding Paytm’s PPI (pre-paid instrument) license, and the company does not see any immediate solutions to the issues at hand.
The RBI’s decision to forbid Paytm Payments Bank Ltd. from conducting new credit and deposit operations, top-ups, fund transfers, and other similar banking operations by February 29, 2024, according to Macquarie’s most recent note, will have serious ramifications because it will severely impair Paytm’s ability to keep users in its ecosystem, which will in turn limit its ability to sell payment and loan products.
According to the statement, significant revenue and profitability effects should be closely monitored.
As per, the RBI has carried out a thorough IT audit and has continued to identify non-compliance, which in its view indicates that the , since the first ban (in March 2022) for onboarding new customers (22 months have passed). Macquarie said that the RBI had taken 15 months to revoke its ban on digital business activities of the largest private sector bank.
According to the statement, the RBI’s indirect cancellation of Pay-tm’s PPI license indicates a lack of immediate resolution to the issues.
The greater problem, according to Macquarie, is that Pay-tm has not been in good standing with the regulator. As a result, their lending partners may decide to reevaluate their partnerships in the future.
The opinions shared here are solely derived from our evaluation of RBI’s actions.
All 33 crore+ wallet accounts are held by Paytm’s payment bank. Since Paytm’s monthly transacting users (MTU) are currently 10 crore, and the previous limitation was for onboarding new users, Pay-tm may be able to continue using PBPL’s client base to sell financial products and payments.
Basic banking operations such as credit, deposits, fund transfers, UPI transactions, FASTag toll payments (Pay-tm has a 17 percent market share and 6 crore users), bill payments, and wallet usage are not allowed for current customers.
According to the statement, “We think that the harsh limits placed on PBPL considerably hinder Paytm’s ability to retain clients in its ecosystem, and as a result, restrict it from selling payment goods and loan products.”
Pay-tm Payments Bank Ltd. was directed by the Indian Central Bank in a press release on Wednesday. Pay-tm faces a significant action from the Reserve Bank of India (RBI).
The RBI has imposed strict restrictions on PPBL as a result of a comprehensive audit carried out by external auditors that revealed continued supervisory concerns and persistent non-compliance within the bank, as stated in the RBI’s news statement.
Only funds from accounts or other prepaid instruments may be withdrawn by customers.Previously, RBI prohibited PBPL from accepting new clients due to significant supervisory issues until the company could finish its thorough IT audit.
Paytm responded to the RBI action on Thursday, February 1st, with a statement stating that it would act promptly to follow the RBI’s directives regarding Paytm Payments Bank. Consequently, the company predicted that its annual EBITDA would be negatively impacted by ₹300 to 500 crore in the worst-case scenario going forward, but it expects to keep growing and become more profitable.
Following the Reserve Bank of India’s (RBI) measures against Paytm Payments Bank Ltd. (PBPL), eminent international research firm Macquarie examines the possible effects on Paytm’s extensive user base and its commercial activities.
Strategic Importance of PBPL: With over 330 million wallet accounts hosted by the payment bank, it is a key component of Paytm’s ecosystem. According to Macquarie, Paytm could continue to use PBPL’s customer base to sell financial products and payments, since the platform’s current MTU (monthly transacting users) is 100 million and the previous ban was for onboarding new users.
Restrictions on Current Customers: As of right now, current PBPL clients are prohibited from doing several basic banking functions, including credit, deposits, fund transfers, UPI transactions, bill payments, wallet usage, and FASTag toll payments (which account for 17% of the market and have 60 million users).
Effect on Customer Retention: Paytm’s ability to keep customers within its ecosystem is expected to be hampered by the strict regulations placed on PBPL. Macquarie notes that this restriction may have a significant effect on the sale of payment and loan products, which could present medium- to long-term challenges for revenue and profitability.
The research group thinks that medium- to long-term effects on revenue and profitability could be substantial and continue to be an important thing to watch.
Does this prohibition have an end in sight?
Macquarie stated that the RBI’s thorough IT audit after the first ban in March 2022, which lasted 22 months, revealed ongoing non-compliance, suggesting significant lapses. The RBI took 15 months to reverse its ban on the largest private sector bank’s digital business activities.
The statement continued, indicating that in our perspective, the RBI is indirectly revoking Paytm’s PPI license, implying no immediate resolution to the issues.
The larger problem, according to Macquarie, is that Paytm has not been in good standing with the regulator. As a result, its financing partners may need to reconsider their partnerships.
In the meantime, Macquarie has set a target price of ₹650 per share for Paytm shares, with a “neutral” rating.
Paytm to take immediate steps to comply with RBI directions
Paytm share price BSE, RBI prohibition on Paytm Payments Bank: The Reserve Bank took action against Paytm Payments Bank in response to an external auditor’s compliance validation report and a thorough system audit report.
Paytm share price BSE, RBI ban on Paytm Payments Bank: Paytm notified investors in a filing that it is acting immediately in accordance with RBI directives, including collaborating with the RBI to promptly resolve their concerns.
According to the filing, the company has been informed by PPBL that the RBI has issued further directions under section 35A of the Banking Regulation Act, 1949.
A day after the Reserve Bank of India (RBI) forbade Paytm Payments Bank from accepting deposits or top-ups in any customer account, prepaid instrument, wallet, or FASTags after February 29, 2024, shares of One 97 Communications, the parent company of Paytm, hit a 20% lower circuit of Rs 608.8 in Thursday’s opening trade.
Following a thorough system audit report and a following compliance validation report from external auditors, the Reserve Bank took action against Paytm Payments Bank.
In response to the news, international stockbroker Jefferies lowered the company from its prior “buy” recommendation to “underperform,” with a target price reduction of Rs 500 from Rs 1,050, suggesting a substantial decline of more than 34%.
Paytm’s shares closed slightly lower on Wednesday, down 0.01 percent, at Rs 761.
However, Macquarie stuck with its “neutral” call on the stock, indicating a potential decline of more than 14% with a target of Rs 650. Similarly, Citi also kept its “neutral” rating on the counter, albeit with a somewhat higher target of Rs 900, indicating a potential gain of more than 18%.
The brokerage maintained a positive view, estimating a moderating 21 per cent top-line CAGR in FY24–28, while operating leverage is also playing out as marketing expense requirements ease and ESOP costs moderate. As a result, the brokerage expects the company to break even on EBITDA in FY25 and reach a 20% EBITDA margin by FY28. Earlier in mid-January, UBS began coverage on the fintech firm with a buy and a one-year price target set at Rs 900.