Paytm Shares Price Falls Because of this Reason

Paytm shares price fell drastically on March 15, 2022. Popular payment platform Paytm, formerly known as One97 Communications, had its stock plummet more than 13% on Monday after the central bank prohibited the company's payments bank from accepting new clients and demanded an investigation of its IT infrastructure. After evaluating the IT auditor's report, the Reserve Bank of India (RBI) indicated on Friday that it will enable Paytm Payments Bank to accept new clients, subject to certain conditions.

Paytm has made its debut as the country's biggest-ever initial public offering in November last year. However, the listing was also seen as one of the worst in the Indian stock market. Paytm shares have fallen by more than 65% since its debut including Monday’s losses.

Paytm Should Increase Efforts on Engaging Existing Users

Paytm like other digital payments startups should increase efforts to build engagement with its existing user base to offset any negative impact of the ban on new users, said Analysts at ICICI Securities.

"Now, assuming deceleration in new user onboarding and a negative impact on incremental payment income. we adjust our target price to Rs 1,285 (previously Rs 1,352)," the research firm stated, adding that the company's plan to file for conversion into a small financing bank may be postponed

Reason Behind Paytm Shares Price Fall

The current drop in the Paytm share price is due to the Reserve Bank of India (RBI) prohibiting Paytm Payments Bank from accepting new clients. The RBI stated in a statement On Friday that it took the measure due to "material supervisory concerns," but did not elaborate.

Future of Paytm Payments Bank

The RBI has also asked the payments bank to hire an IT audit company to perform a thorough System Audit of its IT system. "Paytm Payments Bank Ltd's onboarding of new clients would be subject to particular approval to be given by RBI after considering the report of the IT auditors," the RBI stated. Paytm Payments Bank stated in its statement that it was collaborating with the banking authorities to resolve the issues. "We will contact you when we resume the establishment of new accounts after receiving RBI permission." "We will tell you once we have received RBI authorization to resume the establishment of new accounts," it stated.

Huge Loss to those who put Money in Paytm IPO

Paytm's initial public offering (IPO) took place barely a year ago. It has been ranked as the most popular IPO of 2021. With an offering size of Rs 18,300 crore, this was the largest IPO ever. Under the terms of the offering, the business set an upper price band of Rs 2150. Despite being the largest and most popular IPO, it failed investors. On November 18, 2021, the company's shares were launched on the market.

It was listed at Rs 1955, a record high, as opposed to the issue price of Rs 2150. On the first day of trading, it plummeted 27% and finished at Rs 1564. The stock is presently trading at Rs 595, which is 72% lower than the issue price and 70% lower than the post-listing high. One of the causes for this collapse, according to experts, is its high worth. At the same time, no one knows how long the firm will be successful.

Paytm Shares Price Stands on this Position

Since its initial public offering on November 18, Paytm's shares have fallen by more than 70% from the issue price of Rs 2,150 per share. The company sought a valuation of Rs 1.39 lakh crore through initial public offering at the issue price, and its market cap stood at Rs 44,423 crore as of early Monday.

Negative View of Brokerage

The stock is still rated as an underperformer by brokerage firm Macquarie. According to the brokerage firm, the RBI has prohibited the payments bank from adding new customers. Even though the payment bank already has a large client base, it will have little impact on the company's operations. However, there will be an effect on the brand and client loyalty.

According to brokerage firm ICICI Securities, following the RBI prohibition, the corporation would have to take further measures to counteract the negative impact and enhance the participation of existing customers. Moderation in the onboarding of new customers is now expected, which may have a detrimental impact on income. Although the brokerage remains bullish on the stock, the target price has been cut to Rs 1285.