Paytm shares recover intraday losses after 3% fall post RBI decision on subsidiary PPSL

Stocks in News: Shares of Paytm made a stunning recovery after initial slump as strong buying in the fintech company lifted it from day's low. The stock opened 3 per cent lower at Rs 444 apiece on NSE from its previous close of Rs 465.20 mainly on account of news of banking regulator putting a pause on on-boarding of online merchants by Paytm Payments Services Limited (PPSL). PPSL is a 100 per cent subsidiary of parent company One 97 Communications Limited.

The stock later turned green to quote Rs 476 at 11:36 AM, up around 2.50 per cent. The scrip hit an intraday high of Rs 479.50. 

The company, in its response has said that the Reserve Bank of India’s (RBI) decision will have no material impact on its business.

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One97 Communications (OCL), which owns the Paytm brand, had proposed to transfer the payment aggregator services business undertaken by it to PPSL in December 2020 to comply with payment aggregator (PA) guidelines of the Reserve Bank of India (RBI) but the banking regulator had rejected its application.

The company had re-submitted the required documents in September 2021.

Paytm said PPSL has now received a letter from RBI in response to an application for the authorisation to provide PA services for online merchants.

As per the letter, PPSL is required to "Seek necessary approval for past downward investment from the company into PPSL, to comply with FDI Guidelines" and "not onboard new online merchants".

Paytm, in the regulatory filing, said it can resubmit the PA application within 120 calendar days.

The company will not onboard new online merchants till the time approvals remain pending.

In chat with Zee Business, market expert Kunal Saraogi has recommended a exit on rise strategy in Paytm shares. He said that the stock has been at a receiving hand and has already been beaten significantly.

He said that the current chart structure does not indicate any material improvement based on which buying can be done. Investors holding this stock can look to sell on rise, he added.  

Earlier, brokerage firm JP Morgan in its recommendation maintained a rating of ‘Overweight’ on Paytm stock and estimating an upside of 100 per cent. The brokerage firm has set a target of Rs 1100, estimating gains of Rs 560 per share. JP Morgan said that high quality investments will continue as the company is eyeing higher free cash flow generation.

This US-based financial services company and investment bank highlighted Paytm’s sustained focus on achieving its September 2023 target of Adjusted EBITDA getting breakeven.  

Also Read: Paytm Share Price: JP Morgan sees Rs 560 per share upside in this fintech stock

Paytm shares have been hitting new lows as selling in this stock remains unabated. One 97 Communications shares' RSI (Relative Strength Index) suggests that the stock is trading in an oversold territory.  

The RSI has fallen below 20 to 16.8 according to data sourced from Trendlyne. The level below 20 is considered as strongly oversold.  

Another indicator, MFI or Money Flow Index has ebbed to 4.7, significantly lower from a benchmark of 20 and indicates a massive selling in the counter.  

Also Read: Paytm share in oversold territory, 7 in 9 oscillators turn bearish: What technical charts say about stock

Out of 9 oscillators, 7 are trading below, the data suggests.

 Source: NSE

"We can continue to onboard new offline merchants and offer them payment services including All-in-One QR, Soundbox, Card Machines, etc. Similarly, PPSL can continue to do business with existing online merchants, for whom the services will remain unaffected. We are hopeful of receiving the necessary approvals in a timely manner and resubmitting the application," Paytm said.

(Disclaimer: The views/suggestions/advises expressed here in this article is solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)