Paytm stock hits 20% lower circuit after RBI strictures

A day after the Reserve Bank of India (RBI) announced curbs on Paytm Payments Bank Limited’s (PPBL) services, shares of its parent One97 Communications (OCL) on Thursday hit the lower circuit.

The RBI has barred Paytm from accepting deposits or top-up customer accounts, wallets, FASTAGS, and other instruments after February 29 citing “persistent noncompliance” and “material supervisory concerns”.

Its stock ended ~ 609, after hitting 20 per cent lower trading limit within minutes of opening.

Several analysts downgraded the stock fearing adverse impact of the RBI order.

“Given the severe restrictions imposed on

PPBL, we believe it significantly hampers

Paytm’s ability to retain customers, and accordingly restricts it from selling payment and loan products. We think revenue and profitability implications in the medium to long term could be significant and remain a key item to monitor,” said a note by

Macquarie, which has a price target of ~650 on the stock.

“We, thus, remain watchful of Paytm’s business model and its ability to navigate through this highly uncertain regulatory and macro environment. We are awaiting clarity from the company on the business outlook, we downgrade our rating to ‘neutral’ with a revised target price of ~575,” said another note by Motilal Oswal. “PPBL is taking immediate steps to comply with RBI directions, including working with the regulator to address their concerns as quickly as possible,” the company informed the exchanges.

Paytm expects an impact on its annual earnings before interest, taxes, depreciation and amortisation (Ebitda) in the range between ~300 and ~500 crore. The company has clarified the regulator’s move will not affect its verticals.