BSE Reduces Paytm Share Limit to 10% As RBI Action Triggering Stock Drop

The national bourses have adjusted the daily limit on One97 Communications Ltd, the operator of Paytm, reducing it from 20% to 10%. This move follows two consecutive days of Paytm shares hitting the 20% lower circuit, resulting in a loss of investor wealth amounting to ₹15,016 crore. Reserve Bank of India took action on 31 January imposing restrictions on Paytm Payments Bank Limited after a system audit report and compliance validation by external auditors. PPBL is prohibited from accepting deposits or top ups in any customer account, wallets, or FASTags after 29 February, under section 35A of the Banking Regulation Act, 1949.

Current Developments

In response to the regulatory measures, One97 Communications announced that it would collaborate exclusively with other banks distancing itself from its own payments bank. This decision was driven by the RBI's findings of persistent noncompliance and major supervisory concerns at Paytm's payments bank.

Market responded swiftly to the regulatory developments, with Paytm shares dropping by 20% on Friday due to this sharp decline both the National Stock Exchange and the Bombay Stock Exchange revised the daily limit on Paytm shares to 10% to manage volatility. Out of 15 analysts tracking the company, six have a 'buy' rating, five recommend 'hold,' and four suggest a 'sell.' The average of 12-month analyst price targets indicates a potential upside of 59.5%, despite the recent challenges faced by Paytm.

Despite the challenging scenario, financial services major Morgan Stanley invested in Paytm's parent company, One97 Communications through its affiliate, Morgan Stanley Asia (Singapore) Pte - ODI, the company acquired a 0.8% stake in Paytm, purchasing 50 lakh shares for ₹243.60 crore at an average price of ₹487.20 apiece.

last Friday Paytm shares faced a tough situation getting stuck at a 20% lower circuit and ending the day at ₹487.20. Looking at the past 5 days, there's been a considerable decline of -35.94%. If we extend our view to the last 6 months it's been an even rougher ride with a decrease of around 37% and considering the overall journey from the beginning, Paytm shares have seen a drop of almost 69%.

Final Words

Reserve Bank of India has recently taken regulatory actions that caused a substantial impact on Paytm's stock, resulting in revised daily limits and a considerable loss in investor wealth and the investment made by Morgan Stanley collectively offers a detailed look into the current challenges and opportunities within the Paytm ecosystem. But Investors just jump into the Paytm stock, Investors must wait until the whole case is resolved and a clear picture comes in front of us.