Shares of Paytm parent, One 97 Communications, fell over 4% in early trade on Monday after the Reserve Bank of India refused to grant payment aggregator licence to its subsidiary, Paytm Payments Services Limited (PPSL). The central bank has also barred PPSL from onboarding new online merchants. 

One 97 Communications Ltd., the operator of digital payments firm Paytm, has been asked to re-submit its payment aggregator (PA) application within 120 calendar days. With this, Paytm has become the first large online payment gateway provider, which has received rejection from the apex bank. Other key players such as Pine Labs, Razorpay, CCAvenues and Cashfree have received approvals from the RBI for their PA applications.

Meanwhile, Paytm in an exchange filing on Friday said that “no material observations” were made by the RBI. “This has no material impact on our business and revenues, since the communication from RBI is applicable only to onboarding of new online merchants.”

“We can continue to onboard new offline merchants and offer them payment services including All-in-One QR, Soundbox, Card Machines, etc. Similarly, PPSL can continue to do business with existing online merchants, for whom the services will remain unaffected,” it said.

As per the exchange filing, PPSL is required to take necessary steps and resubmit the PA application within 120 calendar days. Besides, it needs to take necessary approval for past downward investment from Paytm into PPSL, to comply with the foreign direct investment (FDI) norms.

“We are hopeful of receiving the necessary approvals in a timely manner and resubmitting the application,” it added.

Reacting to the news, Paytm share price opened lower by 3.9% at ₹446.75, against the previous closing price of ₹464.80 on the BSE. In the first hour of trade so far, the share of the fintech company declined as much as 4.4% to hit a low of ₹444.35, while market capitalisation slipped to ₹30,348 crore. In comparison, the BSE benchmark Sensex was trading 120 points higher at 62,413 levels, tracking soft cues from global peers.

Paytm shares slump 80% since IPO

Paytm, which made its market debut on November 18 last year, has emerged as the worst performer among recent large initial public offerings (IPOs), which has wiped off nearly 80% of investors' wealth (from its issue price of ₹2,150) since its listing.

The Vijay Shekhar Sharma-led company, which raised ₹18,300 crore in then the country's largest ever IPO, has registered the worst first-year stock performance among large IPOs over the past decade, breaching billionaire Elon Musk-led Tesla’s record, which erased 75% of its market value in one year after its $2.4 billion public offering in 2012.

In the last one year, Paytm shares have delivered a negative return of 73.5% to its shareholders, while it has fallen 28.5% in the past six months. In the calendar year 2022, the largecap stock has shed 65%, while it tumbled 28% in a month.

Paytm shares have witnessed sharp selling in the last six sessions, with the stock price falling 18% since November 18, after its one-year mandatory lock-in period for pre-IPO shareholders expired. The stock currently trades near its all-time low of ₹439.60 touched on November 24, 2022, while it touched a record high of ₹1,961.05 on its listing day.

Despite all these odds, Citi Research has given a ‘BUY’ rating to Paytm, with a target price of ₹1,055, indicating a potential upside of 135% from its current levels.

In case of a bull market, Citi sees the stock at ₹1,230, suggesting a 176% potential return. In a bear case scenario, it sees the stock at ₹605, a potential 36% upside.

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