Paytm shares surge 10% amid reports of CEO's meetings with RBI and Finance Minister

Paytm shares surge: The shares of Paytm parent One97Communications soared close to 10 per cent on Wednesday, February 7, following reports that Vijay Shekhar Sharma, CEO of the digital payments giant had engaged in discussions with Finance Minister Nirmala Sitharaman and the Reserve Bank of India (RBI) to address regulatory concerns plaguing its payments bank business.

The RBI, on January 31, had directed Paytm Payments Bank to cease new deposits and its digital wallets by March, citing supervisory concerns and non-compliance, the company has faced significant pressure in the market.

Despite the surge, Paytm shares remain considerably below their pre-January 31 levels, indicating ongoing investor caution amid regulatory uncertainties.

Reports of discussions between Paytm's CEO and government and central bank officials have instilled some confidence among investors, shedding light on potential efforts to address regulatory issues and ensure compliance. A source familiar with the talks revealed that discussions were ongoing regarding regulatory concerns and compliance issues with both the RBI and the ministry, according to Reuters.

Seeking an extension of the February 29 deadline from the RBI, Paytm also aims to clarify matters concerning the transfer of its license for the wallets business and the digital highway toll payment service Fastag.

"Investors are getting some confidence from the fact that the CEO has met the regulators," remarked Kranthi Bathini, equity strategist at WealthMills Securities. However, uncertainties persist regarding compliance and operational strategies amid the crisis.

Despite the positive sentiment, Paytm shares continue to trade approximately 24 per cent below the median price target of Rs 650 set by 14 analysts, as per LSEG data.

Pranav Gundlapalle, senior analyst at Bernstein, emphasised the importance of ensuring a smooth transition out of Paytm's dependency on Paytm Payments Bank Ltd. He said, “There is a realisation that Paytm's payment operations are quite sizable, and customers and merchants could be inconvenienced by a sudden shutdown of payments bank operations.”

(With Reuters inputs.)