Paytm stock jumps 5%, recovers from 42% loss in 3 days after RBI curbs on payments bank

Shares of Paytm jumped 5 percent on February 6, recovering from over one percent fall in the morning trade, after the counter was locked in a lower circuit for three straight sessions as RBI imposed sweeping restrictions on its payments bank business. The curbs include a ban on accepting new deposits and conducting credit transactions after February 29.

At 10.15 am, Paytm stock was trading at Rs 460, up 5 percent from the previous close.

Earlier, on February 5, the shares of Paytm parent One97 Communications closed 10 percent down, locked in the lower circuit at Rs 438.5. The stock is still down a massive 40 percent in the last four trading sessions from Rs 761.4.

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To add to the misery, the Confederation of All India Traders (CAIT) also issued an advisory urging brick-and-mortar businesses to shift to alternative payment applications.

“The RBI has imposed certain restrictions, prompting CAIT to recommend that users take proactive measures to protect their funds and ensure uninterrupted financial transactions. Large number of small traders, vendors, hawkers and women are making payments through Paytm and, as such, RBI restrictions on Paytm could lead to financial disruptions for these people,” the industry body said on February 4.

Brokerages have significantly downgraded the Paytm stock and its target price. While Jefferies has lowered the target to Rs 500, Macquarie reduced it to Rs 650.

Paytm, however, tried to contain the crisis, refuting the outcome of an investigation by the Enforcement Directorate (ED) after reports claimed that a probe may be initiated if charges related to money laundering are found.

Note that the Paytm stock price at Rs 438.5 at the last close has fallen sharply below both the brokerage target prices.

To reassure employees amid the ongoing crisis at the company, founder Vijay Shekhar Sharma affirmed that there will be no layoffs. The company is actively engaging with the Reserve Bank of India (RBI) and collaborating with other banks for potential partnerships.

“We are not completely sure of things… Like what exactly went wrong. But we will figure out everything soon. We will reach out to the RBI to see what can be done,” Sharma told Paytm employees.

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