Shares of Paytm parent, One97 Communications, tumbled nearly 9% in early trade on Friday amid a report that the payment solutions company is in talks to acquire e-commerce startup Bitsila. The Bengaluru-based startup, established in 2020 by Dasharatham Bitla and Sooryah Pokkali, is the third-largest seller-side platform on the Open Network for Digital Commerce (ONDC).

The fintech major is in advanced stages of negotiation and the deal is likely to close in the coming week, as per the report. The move is being seen as part of Paytm’s strategy vision to expand its presence within ONDC, an e-commerce platform established by the government to allow users to access various online services conveniently in one place, eliminating the need for multiple apps and streamlining the user experience.

Paytm, however, has denied the proposed acquisition of Bitsila, calling the news "entirely misleading".

In December 2023, Paytm Chief Executive Officer (CEO) Vijay Shekhar Sharma, at the launch of ONDC's 'Build for Bharat' initiative, had said that the company aimed to onboard 10 million of its merchants onto the ONDC platform by the end of 2025.

The deal is happening at a time when Paytm’s payment services arm, Paytm Payments Bank (PPBL), is going through a deep crisis, and its future looks uncertain amid regulatory challenges. The Reserve Bank of India (RBI) has directed PPBL to stop on-boarding new customers and barred the company from taking further deposits or credit transactions or top-ups in any customer accounts, prepaid instruments, wallets, FASTags, NCMC cards, etc. after February 29. As per the company, the RBI’s action is likely to have a worst case impact of ₹300-₹500 crore on its annual EBITDA going forward. However, it expects to continue on its trajectory to improve its profitability.

Reacting to the news, Paytm shares opened lower for the second straight session at ₹416.35, down 6.9% against the previous closing price of ₹447.1 on the BSE. The fintech stock declined as much as 8.7% to hit a low of ₹408.30 amid strong volume. The stock has fallen over 16% in two sessions, hitting a 10% lower circuit limit on Thursday.

At 10:30 AM, Paytm shares were trading at ₹414.60, down 7.27%, while the market capitalisation slipped to ₹26,133 crore, with nearly 11.5 lakh shares changing hands over the counter.

The share price has plummeted 45% in the last seven sessions, eroding over ₹19,000 crore in market capitalisation, after the RBI issued the directive against PPBL on January 31, 2024. After imposing the first ban in March 2022 for onboarding new customers, the RBI took strict action this time following a report of the external auditors which revealed "persistent non-compliances and continued material supervisory concerns" in the bank. 

In March 2022, the RBI had imposed restrictions on PPBL and directed it to appoint an IT audit firm to conduct a comprehensive system audit of its IT system. In an earlier action on October 20, 2021, RBI had imposed a monetary penalty of ₹1 crore on the bank for violation of the Payment and Settlement Systems Act, 2007.

Meanwhile, founder and CEO Sharma has assured customers that PPBL will continue to be operating even after RBI’s February deadline. “To every Paytmer, Your favourite app is working and will keep working beyond 29 February as usual. I, along with every Paytm team member salute you for your relentless support. For every challenge, there is a solution and we are sincerely committed to serving our nation in full compliance,” Sharma said in a post on X (formerly Twitter).

Amid the ongoing crisis, Sharma on Tuesday reportedly met Finance Minister Nirmala Sitharaman and explained his position. 

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