Paytm gains 4% as PPBL reconstitutes its board; Macquarie maintains underperform rating
Paytm share price: One 97 Communications, the parent company of Paytm, said it supports PPBLs move to opt for a board with only independent and executive directors by removing its nominee.
Paytm share price: Paytm's parent company's shares in Tuesday's trade surged by as much as 4 per cent in early morning deals on February 27 as the company's associate firm, Paytm Payments Bank (PPBL), announced the reconstitution of its board.
Last evening, the fintech company announced that Vijay Shekhar Sharma has stepped down as part-time non-executive chairman of Paytm Payments Bank Limited (PPBL), and the bank board has been reconstituted.
PPBL reconstitutes the board: Ex-Central Bank of India Chairman Shri Srinivasan Sridhar, Retd. IAS Shri Debendranath Sarangi, former Executive Director of Bank of Baroda Shri Ashok Kumar Garg, and Retd. IAS Smt. Rajni Sekhri Sibal joined the board, according to the company's filing with the exchanges.
One 97 Communications, the parent company of Paytm, said it supports PPBL’s move to opt for a board with only independent and executive directors by removing its nominee.
"PPBL has informed us that they will commence the process of appointing a new chairman," added the filing.
The company's future business will be led by the newly reconstituted board.
Here's what Paytm investors can do after the latest development
Global brokerage Macquarie has given an 'underperform' rating on the stock with a target of Rs 275, signifying a downside of 36 per cent from the last traded price. The brokerage maintained that after Vijay Shekhar Sharma resigned from the board of PPBL, the apex bank would reconsider its stance. At present, 51 per cent of the stake in PPBL is owned by Vijay Shekhar Sharma.
Furthermore, the brokerage stated that it cannot expect the RBI to authorise any related-party transactions between Paytm and PPBL. This move by Sharma suggests that he is willing to give up his control of PPBL. If PPBL is allowed to carry out its business, it will increase the profitability of Paytm.
In the FY23 annual report, PPBL's consolidated profit stood at Rs 2.44 crore.
Independent market analyst Ambareesh Baliga is of the view that Vijay Shekhar Sharma's stepping down is seen as positive; the disruption may be less than what the markets had envisaged when the story broke out; however, it doesn't mean that a new bull run has started in this stock.
"It is only a bounce back; we could see it topping off around Rs 525 or Rs 550, after which it will move based on how soon they can get back to the path of normalcy and growth under the changed scenario. It's a given fact that profitability has been pushed much further," the analyst added.
It must be noted that the RBI has barred PPBL from accepting deposits and credits from any customer post-March 15 for persistent non-compliance and continued material supervisory concerns at the bank.
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