RBI crackdown costs Paytm $2.1 billion | TechCrunch

Shares of Paytm fell another 20% on Friday before falling lower and temporarily halting trading as the Indian financial services company reels from a central bank clampdown.

Paytm’s shares fell to 487 Indian rupees, or $5.88, within minutes of opening, a 55-week low. Paytm shares also fell 20% on Thursday. Paytm, which currently has a market capitalization of $3.73 billion, lost $2.1 billion two days after its market capitalization was reached.

The Reserve Bank of India (RBI) this week expanded restrictions on Paytm Payments Bank, which processes transactions for financial services giant Paytm, Banned from providing many services to banks, including accepting new deposits and credit transactions on its services.In response, Paytm said it would Termination of business with its affiliates And seek cooperation with other banks.

While Paytm maintains that the RBI’s direction will reduce its annual EBITDA by $60 million in the worst-case scenario, the market as a whole is interpreting the situation differently.

Paytm management aims to offset losses over time and believes the impact on its UPI business is manageable, Morgan Stanley said on an analyst call on Thursday afternoon, although economic conditions are expected to remain largely unchanged No change, but UPI incentive charges may slow down, analysts said on Friday.

“Paytm does not believe the insurance distribution and stock broking business will be affected. On the loan distribution front, the management expects disbursement to slow down in the coming weeks and said it is in touch with partners to explain the current situation to them. Additionally, the The bank does have certain merchant loans, the settlement of which is done in PPBL (Paytm Payments Bank Limited) bank account – the bank said it is being transferred to the backup bank account of the merchant and does not expect any major impact,” analysts at wrote in the report.

Paytm, with a market capitalization of $3.7 billion, is valued at less than a third of its private rival, Walmart-backed PhonePe. Raised US$850 million last year, valuing it at US$12 billionDo Less than half of Paytm’s revenueIn addition, Paytm has raised more than $5 billion through private placement rounds and IPOs.

It is difficult for market analysts to revise the target price of Paytm stock. In a note to clients on Friday, Morgan Stanley said it cut its target price on Paytm stock to 555 Indian rupees from 690 Indian rupees on Thursday.

The RBI’s punishment of Paytm may not be over has internally Discussion on revoking payment bank license Paytm’s business, TechCrunch reported on Thursday.

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