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Paytm Chief Executive Vijay Shekhar Sharma met the Indian central bank on Monday to discuss plans to address regulatory concerns, two sources with direct knowledge of the talks said on Tuesday, days after the regulator imposed curbs on its banking affiliate.
The Reserve Bank of India (RBI) told Paytm Payments Bank last Wednesday to stop accepting new deposits in its accounts and its popular digital wallets from March, citing supervisory concerns and non-compliance with rules.
“Discussions are on about addressing RBI’s regulatory concerns, and the company has sought an extension of the February 29 deadline,” said one of the sources.
Paytm has also been seeking clarity from the RBI regarding the transfer of its licence for the wallets business and digital highway toll payment service Fastag, the source said.
“The RBI heard Paytm out without making any commitments,” a second source said.
Paytm and the RBI did not immediately respond to Reuters’ request for comment.
As of Monday, Paytm’s shares had fallen about 42 percent, wiping $2.5 billion (roughly Rs. 20,762 crore) off its market value on concerns about the impact on the wider business, as Paytm Payments Bank powers most features of the digital payments app, which competes with the likes of Walmart’s PhonePe and Google.
The RBI’s regulatory clampdown could also be a precursor to Paytm’s licence being cancelled, a source familiar with the matter said last week.
The stock hit a record low early on Tuesday following a Reuters report that India’s federal anti-fraud agency was investigating if platforms run by the company have been involved in violations of foreign exchange rules.
A Paytm spokesperson denied any violations of foreign exchange law, calling the allegations “unfounded and factually incorrect”.
Its shares later reversed losses, rising as much as 8 percent on the day and last trading 6 percent higher at Rs. 465.
Avinash Gorakshakar, head of research at Profitmart Securities, said the share move could be a “dead-cat bounce” after the recent rout, pointing to the amount of negative news still overhanging the stock.
Bernstein lowered its target share price to Rs. 600 from Rs. 950, but retained an outperform rating.
“While the regulatory action will no doubt have a lasting impact on investors’ assessment of the business model risk and of the management’s ability to handle regulatory risk, we expect the company to successfully execute the operational changes required to overcome the restrictions,” Bernstein analysts said.
© Thomson Reuters 2024