Paytm crashes over 20%, takes Rs 585-crore toll on fund houses, insurance companies

The stock declined after the Reserve Bank of India imposed major restrictions on the company’s lending business which also includes a prohibition on accepting fresh deposits and doing credit transactions after February 29

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Mutual funds, insurance and provident funds lost around Rs 585 crore after shares of One97 Communications Ltd, which runs Paytm, crashed over 20 percent at the open on February 1, following RBI crackdown on its lending business.

The stock was trading at Rs 608.80 on the BSE as against its last closing price of Rs 761. So far this year the stock is down around 1 percent, while it lost 27.45 percent in 2023.

As of the December 2023 quarter, mutual funds held around 5 percent stake in Paytm, compared to 2.79 percent a quarter ago.

Among the mutual funds, Mirae has the highest stake in Paytm at 2.51 percent or 1.59 crore shares, valued at over Rs 968 crore. Nippon India Mutual Fund and Quant Mutual Fund has stakes worth Rs 340 crore and Rs 110 crore in Paytm. Foreign investors have 63.7 percent stake as of the December quarter, compared to 60.92 percent a quarter ago lost around Rs 6,150 crore.

SAIF III Mauritius Company has the biggest stake of around 10.83 percent in Paytm, followed by Resilient Asset Management BV which holds 10.3 percent. Antfin Netherlands Holding BV and SVF India Holdings (Cayman) hold 9.9 percent and 6.5 percent stake in the company.

The stock declined after the Reserve Bank of India imposed major restrictions on the company’s lending business which also includes a prohibition on accepting fresh deposits and doing credit transactions after February 29.

Jefferies downgraded Paytm to ‘underperform’, slashing the price target by over 50 percent to Rs 500, citing the RBI’s concerns on non-compliances.

Paytm Payments Bank, facing restrictions, may see a worst-case annual EBITDA impact of Rs 500 crore. Jefferies estimates the direct impact on Paytm’s wallets and payments business at 20-30 percent in EBITDA, with the potential reputational damage affecting EBITDA further by 20-25 percent.

This poses challenges for Paytm, aiming to boost profitability, despite reporting a 38 percent on-year revenue increase to Rs 2,850 crore in Q4 2023 and a narrowed net loss of Rs 220 crore. EBITDA before ESOP grew to Rs 219 crore.

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