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Paytm Stocks Downward Slide, Fall 9% on Reports of Regulatory Scrutiny

Shares of One97 Communications, the parent company of digital payments firm Paytm, resumed their downward journey on Thursday after a brief recovery in the past two sessions. The stock plunged 9.31% to hit an intraday low of Rs 450 on the BSE after closing 10% higher on Wednesday.

This sharp fall came following media reports that the Central Depository Services (CDSL), the largest depository participant in India, has initiated an inspection of the know-your-customer (KYC) verification process followed by Paytm Money. Paytm Money is the wealth management of Paytm and give services like stocks, ETFs and mutual funds investments.

According to The Economic Times, CDSL is the latest entity to increase scrutiny of the KYC protocols adopted by Paytm group firms. This comes after the Reserve Bank of India’s directive on January 31st urging regulated entities to re-check KYC processes adopted by relevant FinTech players.

Paytm Spokesperson’s Response

A Paytm spokesperson denied any regulatory investigation and said, “We have consistently assured that neither Paytm nor any of its associates are under investigation by any regulatory agency. Our commitment remains resolving towards operating in compliance with regulatory guidance and continuously enhancing our processes to further the reach of digital payments across India.”

Reasons for Share Price Recovery

In the last two sessions, Paytm shares had recovered some lost ground after reports came in that founder Vijay Shekhar Sharma met Finance Minister Nirmala Sitharaman and top RBI officials.

As per reports, Sharma requested an extension of the February 28th deadline set by RBI for Paytm Payments Bank to stop onboarding new customers. He cited the potential impact on traders and retail customers for demanding this expansion. But, the finance minister directed him to discuss the matter directly with RBI since it is a regulatory issue.

Why is Paytm Under Regulatory Scanner?

Paytm has been under regulatory scrutiny since the beginning of this year after multiple violations were reported in its lending operations and KYC protocols.

  • In January, the Enforcement Directorate launched a probe into alleged foreign exchange rule violations by Paytm and its payment bank. But the company refused these claims.
  • Earlier this month, the RBI barred Paytm Payments Bank from onboarding new customers due to deficiencies observed in its KYC practices. The bank was directed to appoint an IT audit firm to conduct a comprehensive audit.
  • SEBI recently barred Paytm Money and its promoters from taking on new clients for securities trading activities due to violations of securities regulations.

Paytm Share Price Chart

Paytm got listed in November 2021 and its share price has been on a downward spiral since then. Here is a quick look at how the stock has performed since its market debut:

Open Price on Listing Day: Rs 1,950
Current Price: Rs 450 (As of Feb 9, 2024)
Lowest Price: Rs 404 (Jan 24, 2024)

Paytm share price has plunged over 75% from its IPO issue price of Rs 2,150 per share. Paytm’s market value has really taken a beating since its IPO. It peaked at around Rs 1.39 lakh crore when the stock first listed back in November 2021. But now its market cap has plunged to just Rs 30,000 crore.

Experts say Paytm’s share price will likely stay volatile for some time. All the negative news headlines and ongoing trouble with regulators aren’t exactly boosting investor confidence right now.

Those thinking about buying Paytm stock may want to wait until there’s more clarity on how heavy the fines will be or what changes the company needs to make. Paytm could still realize its growth potential in the long run. But in the near term, it seems like caution is warranted for investors sizing up this company.

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