Paytm share hits 10% upper circuit; rebounds for 2nd straight session

As uncertainty shrouds the future of One97 Communications' associate bank Paytm Payments Bank, the company's shares hit 10% upper circuit today after reports of a meeting between Vijay Shekhar Sharma and Finance Minister Nirmala Sitharaman. The stock, which faced its biggest fall since its listing this month, has recovered in the past two sessions as investors turn to grab shares at low prices.

In his meeting with the FM, Sharma reportedly sought support from the ministry regarding the recent RBI diktat. He also discussed the potential impact of such a “harsh” move on the country's fintech industry. In what can be termed a rare move, Sharma has garnered strong support from his peers in the industry, with a group of startup founders writing a letter to the RBI, seeking a review of its harsh decision.

Yesterday, the shares of One 97 Communications had hit a 10% lower circuit in the pre-open session but recovered smartly to rise 8% intra-day as investors saw an opportunity in the beaten-down fintech stock. Today, the share opened a gap-up at ₹461.30 and surged to an intra-day high of ₹496.75, thereby hitting the upper circuit limit on the BSE. This has been a huge relief to the company as the stock has seen consistent beating since the Reserve Bank's stringent action against Paytm Bank, falling more than 42% since February 1, 2024.

At the current share price, the Paytm scrip is trading record 51% down against its one-year high of ₹998.30 touched on October 23, 2023. With a significant rally since yesterday, the scrip is now trading around 19% up as compared to the 52-week low of ₹395.50 touched on Tuesday i.e. February 6, 2024.

A consistent erosion in the share price has dwindled Paytm's m-cap to ₹31, 109.41 crore. At the time of filing the report, 18.47 lakh shares were changing hands on the counter against the two-week average of 10.75 lakh.

In the past week, the Paytm stock has fallen 19.80%, while its one-month fall stands at 29.28%. In the past six months, the stock has fallen 42.64% and by 17.12% in the past year.

On the recent report of Mukesh Ambani-led Jio Financial Services eying to acquire Paytm's wallet business, the company has junked it, saying it is "speculative, baseless and factually incorrect". "We have not been in any negotiations in this regard. We have been informed by Paytm Payments Bank Limited, our associate company, that they also have not been in any negotiations in this regard," says the company.

Global brokerage major Bernstein, in its latest report, has maintained an "outperform" rating on the stock, though it cut the target to ₹600 from ₹950. "While the regulatory action will no doubt have a lasting impact on investors’ assessment of the business model risk and of the management’s ability to handle regulatory risk (a key requirement in the financial services space), we expect the company to successfully execute the operational changes required to overcome the restrictions. We rate Paytm Outperform with Target price of INR 600," its note says.