Shares of India’s One 97 Communications, widely known as fintech firm Paytm, recouped most of their losses on Monday afternoon after an initial dip. Analysts quickly moved to reassure investors, stating that the cancellation of an associate firm’s payment bank licence would have only a limited impact on the company. One 97 Communications operates as a prominent fintech company in India, offering digital payment and financial services. Its now-defunct associate, Paytm Payments Bank, focused on taking small deposits and facilitating money transfers.
The stock initially tumbled as much as 8.4% in its largest intraday fall in over three months but stabilised to trade 1.5% lower by midday. India’s central bank on Friday cancelled the licence of Paytm Payments Bank, an associate firm, citing that “the general character of the management of the bank is prejudicial to the interest of depositors as also the public interest.” One 97 Communications holds a 49% stake in Paytm Payments Bank, with the remaining 51% held by Paytm founder Vijay Shekhar Sharma. The central bank had previously imposed business curbs on Paytm Payments Bank in January 2024, citing non-compliance with rules, which led to a significant dwindle in the firm’s business.
Financial analysts largely dismissed significant concerns regarding One 97 Communications. Emkay Capital analysts stated, “We do not see any financial or operational impact on Paytm, as all commercial agreements with PPBL were terminated and the equity investment was fully impaired by March 2024.” They added that while the order’s tone was severe, Paytm is “legally ring-fenced.” The One 97 board approved the winding up of the payments bank on Saturday, affirming no adverse financial impact is expected due to operations being de-linked over the past two years and the investment being written down. However, BofA Global Research noted a potential future risk, suggesting it “may become harder for Paytm to obtain any potential licences from RBI.”
