Paytm shares displayed volatility throughout Tuesday's trading session, after Vijay Shekhar Sharma's resignation as part-time non-executive chairman
Paytm shares displayed volatility throughout Tuesday’s trading session, after Vijay Shekhar Sharma’s resignation as part-time non-executive chairman and board member of Paytm Payments Bank (PPBL).
The stocks of One97 Communications, the parent entity of Paytm, surged by an additional 5% to INR 449.30 on Tuesday. At 11:01 am, the shares were transacted at INR 436.95 each.
Vijay Shekhar Sharma, the founder and chief executive officer (CEO) of Paytm, tendered his resignation from the board of Paytm Payments Bank on Monday (February 26).
In an official disclosure to the stock exchanges, the fintech startup conveyed Sharma’s resignation as the part-time non-executive chairman and board member of the payments bank. It further announced the installment of a newly constituted board to oversee the company’s operations.
Furthermore, the company outlined its intention to promptly initiate the appointment process for a new chairman for the payments bank.
Following the resignation, Macquarie sustained its ‘Underperform’ rating on One 97 Communications Ltd shares with a preexisting target price of INR 275 per share. The global brokerage expressed doubts regarding the sustainability of Paytm Payments Bank’s operations, despite Sharma’s withdrawal from the bank’s board.
According to the brokerage’s assessment, Sharma’s resignation signals his willingness to cede control of Paytm Payments Bank to the regulator. Presently, he holds a 51 percent stake in the bank.
Macquarie analysts also observed that they anticipate the Reserve Bank of India (RBI) to refrain from authorizing any transactions between Paytm and Paytm Payments Bank in the future.
In line with Macquarie’s observations, certain lending partners are reassessing their affiliations with Paytm, potentially impacting its lending activities if these partners opt to reduce or terminate their ties with the company.
Earlier this month, Macquarie downgraded One97 Communications from a ‘neutral’ to an ‘underperform’ rating and adjusted its price target to INR 275 from INR 650.
Sharma’s resignation and the board reshuffle occur amidst a tumultuous period for Paytm Payments Bank.
Recently, the Reserve Bank of India (RBI) imposed several constraints on the payments bank, prohibiting it from accepting deposits, engaging in credit transactions, or facilitating top-ups in customer accounts due to “persistent non-compliance and ongoing material supervisory concerns.”
Initially, the central bank also barred the bank from furnishing other banking services, including UPI facilities and fund transfers, effective from February 29. However, some of these restrictions were subsequently extended to March 15.
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