Paytm has informed exchanges that founder Vijay Shekhar Sharma has not taken any margin loans, or otherwise pledged any shares that are directly or indirectly owned by him. This clarification comes after the RBI asked Paytm Payments Bank to stop new credit and deposit operations, top-ups, fund transfers, and other such banking operations by February 29, 2024.
At present, Vijay Shekhar Sharma is Paytm's largest shareholder and Significant Beneficial Owner. In August 2023, Vijay Shekhar Sharma acquired a 10 percent stake from AntFin through his 100 percent-owned overseas entity Resilient Asset Management BV, thereby increasing his holding to 19.42 percent. AntFin went on to sell another 3 percent stake later in Paytm via block deals.
As of December 2023, AntFin holds a 9.9 percent stake in Paytm. Sharma is still looking to increase his stake in the company further. "There is never a day that I would not buy more equity in Paytm," Sharma told Bloomberg News in an interview in September 2023.
Also Read | RBI imposes major business restrictions on Paytm Payments Bank
The RBI action in Paytm Payments Bank may hit its annual EBITDA by up to Rs 500 crore, the company said. Analysts at Jefferies estimate the direct impact of the RBI's action on Paytm's wallets and payments business to be around 20-30 percent of its EBITDA. The firm also feels that a reputational impact on lending partnerships can affect Paytm's EBITDA further by 20-25 percent.
This might be extremely problematic for the fintech major, which has been trying to increase its profitability. For the quarter ended December 2023, Paytm reported a 38 percent on-year (YoY) increase in revenue at Rs 2,850 crore, and its consolidated net loss narrowed to Rs 220 crore. The company's EBITDA before employee stock option (ESOP) grew to Rs 219 crore.
There were expectations that Paytm would likely report breakeven on EBITDA in FY25. However, this might not be possible after the RBI action, according to analysts. "We think revenue & profitability implications in the medium to long term could be significant and remain a key item to monitor," said Macquarie in its report.
"We have seen RBI take 15 months time to revoke its ban on digital business activities of the largest private sector bank. However, in this case, since the first ban (in March 2022) for onboarding new customers (22 months have lapsed), RBI has conducted a comprehensive IT audit and continued to identify non-compliance, which in our view indicates that these lapses are quite material," the brokerage firm further noted.
On February 1, 2024, shares of Paytm settled marginally lower at Rs 761.20 on the National Stock Exchange (NSE). The stock is still 65 below its IPO price of Rs 2,150.
Jefferies has downgraded its rating on shares of Paytm to 'underperform' from its previous 'buy' call, while slashing the price target for the stock by more than half to Rs 500. Macquarie has a 'neutral' rating on the stock with a target price of Rs 650 per share.
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