PAYTM has been a wealth destroyer for investors since the time the company went public in India. PAYTM has been the poster boy of startups in India and the company managed to offer very good returns to early investors and VC funds. But the retail investors have largely registered loss after investing in the payment processor. PAYTM’s business model is good and they have a strong reach but the markets have punished the company since its IPO. As the stock managed to recover some of the losses for retail investors, the latest decline has again put big question mark on returns one can get from short, medium or long term investment in this company.

After RBI placed a ban on the company Paytm Payment Bank after finding some irregularities which PAYTM management failed to rectify in due course of time. In an analyst call, PAYTM informed that RBI actions were a big speed bump and that operational changes would be required. This led to two days of 20% lower circuit for the company. On Monday, PAYTM will have 10% circuit limit and it will be seen if the stock manages to close above the 10% lower circuit. It is quite possible that it hits lower circuit during the first few minutes of trade on Monday.

PAYTM founder Vijay Shekhar Sharma wrote on Twitter, "To every Paytmer, Your favourite app is working, will keep working beyond 29 February as usual. I with every Paytm team member salute you for your relentless support. For every challenge, there is a solution and we are sincerely committed to serve our nation in full compliance."

The stock closed below Rs 500 on Friday and all trades were held at 20% lower circuit of Rs 487.20. The stock could open at another 10 percent decline on Monday unless some big fund jumps in and saves the day.

Research firm Motilal Oswal has suggested neutral rating for the stock. The research firm added, “We maintain our Neutral rating with a target of Rs 575.” The analysts said that they would keep an eye on the situation.

Majority of the research firms tracking PAYTM had given positive calls for the stock. ICICI Securities had initiated BUY Call with target price of Rs 1226 on 25 October 2023. The stock has crashed to 52-week low on Friday. ICICI Securities has not yet commented on the latest developments on the counter.

As per a report published by CNBC-TV18, citing a source, "The RBI found that in thousands of cases the same PAN was linked to more than 100 customers and in some cases for more than 1,000 customers. The total value of transactions in some accounts ran into crores of rupees, much beyond regulatory limits in minimum KYC pre-paid instruments raising money laundering concerns."

Jefferies Downgrades Stock to SELL with Target of Rs 500

After the RBI ban on PAYTM bank, brokerage firm Jefferies has downgraded its rating on Paytm to "underperform" from its earlier rating of "buy." The brokerage has also cut its price target on the stock to ₹500 from ₹1,050 earlier.

PAYTM is in portfolio of 68 Mutual Funds

In December, significant fund houses including Mirae Asset MF, Quant MF, and Nippon India MF augmented their holdings of Paytm shares, contributing to the overall exposure. According to data from BSE, a collective 4.99% stake in Paytm was held by 23 mutual funds in December 2023, compared to 19 funds with a 2.79% stake previously.

The breakdown of mutual fund exposure highlights a contrast between active and passive funds. Active funds exhibit a greater allocation to Paytm, with leading funds such as UTI Innovation Fund having a 4.8% exposure, followed by Quant Teck Fund (3.26%) and Quant Mid Cap Fund (3.17%), as reported by RupeeVest.

On the other hand, passive funds, while having exposure, show comparatively lower allocations. As of December 31, 2023, Tata Nifty India Digital ETF and Kotak Nifty Alpha 50 ETF had exposures of 2.89% and 2%, respectively. Similarly, the Bandhan Nifty Alpha 50 Index and Motilal S&P BSE Financial had exposures of 1.94% and 1.76%, respectively.