Paytm shares hit lower circuit again; Anil Singhvi suggests exiting the stock

Paytm share price: Shares of One 97 Communications, the parent company of Paytm, slipped in morning deals on Monday (February 5) for the fourth straight session and hit the 10 per cent lower circuit on BSE at Rs 438.35 apiece.

The stock has hit the lower circuit for the third session in a row. The stock has been in a free fall since the Reserve Bank of India's (RBI) order to its payments bank subsidiary to stop accepting fresh deposits in its accounts or popular wallets from March onwards.

At around 9:51 a.m., shares of Paytm traded 10 per cent or Rs 48.7, lower at Rs 438.35 apiece. The market capitalisation of the company at around the same time stood at Rs 27,838.75 crore.

Zee Business Managing Editor Anil Singhvi recommended selling shares of Paytm even at a loss. He advised not to keep "such a risky stock in the portfolio" and instead suggested buying other quality names.

Paytm बेचकर निकल जाएं 

Paytm का भाव देखकर ललचाएं नहीं 

बिलकुल भी ना खरीदें #Paytm से जुड़े सवाल फटाफट भेजिए #AnilSinghvi पर#PaytmPaymentsBank #PayTMCrisis #One97Communications #PaytmKaro pic.twitter.com/TwO7RJRRTI

— CA Anil Singhvi Zee Business (@AnilSinghvi_) February 5, 2024

What led to a meltdown in Paytm?

The Reserve Bank of India (RBI) last week ordered Paytm Payments Bank Ltd (PPBL), a restricted bank that can take deposits but cannot lend, to not take any further deposits, conduct credit transactions, or carry out top-ups on any customers' accounts, prepaid instruments, wallets, or cards for paying road tolls after February 29.

Paytm wallet customers can use the money until their balance is exhausted. They cannot add money after February 29. And in case the RBI does not relent, top-ups for the Paytm wallet will stop, and transactions through it can no longer be carried out.

As per the RBI's provisional data for December 2023, Paytm Wallet users carried out 24.72 crore transactions worth over Rs 8,000 crore for the purchase of goods and services, while 2.07 crore transactions were carried out for transferring over Rs 5,900 crore.

Why did Paytm Payments Bank come under the RBI lens?

The banking regulator had been frequently flagging off issues. According to sources, money laundering concerns and questionable dealings of hundreds of crores of rupees between popular wallet Paytm and its lesser-known banking arm had led the Reserve Bank of India to clamp down on Vijay Shekhar Sharma-run entities.

Reports further said that PPBL had lakhs of non-KYC (Know Your Customer) compliant accounts, and in thousands of cases, single PANs were used for opening multiple accounts.

There were instances of the total value of transactions running into crores of rupees, much beyond regulatory limits in minimum KYC pre-paid instruments, raising money laundering concerns, sources said.

What has been the company's response to the RBI's January 31 action?

Paytm management has said that PPBL is in discussion with RBI to comply with their direction for continuing the business. Paytm has said that its financial services, such as loan distribution, insurance distribution, and equity broking, are not in any way related to PPBL and are expected to be unaffected.

The company's offline merchant payment network offerings like Paytm QR, Paytm Soundbox, and Paytm Card Machine will continue as usual, and it can onboard new offline merchants as well. Paytm sees an impact of Rs 300–500 crore on its annual operational profit.

Paytm share price: Past performance 

In a year, shares of Paytm have lost over 21 per cent against the Nifty 50's rise of 23 per cent.

(With inputs from agencies)

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