Vijay Shekhar Sharma meets RBI officials, seeks extension of Feb 29 deadline, Paytm stock recovers

Paytm shares rise: After a freefall in three straight trading sessions, the shares of Paytm parent One97Communications recovered on Tuesday, February 6, after the company denied media reports of an agency probe into the alleged FEMA violations and money laundering.

Meanwhile, Paytm's CEO, Vijay Shekhar Sharma, met with the Reserve Bank of India (RBI) officials to discuss plans to address regulatory concerns following restrictions on its banking affiliate, according to news agency Reuters. The RBI ban on Paytm Payments Bank, effective February 29, has shaken the company's core, restricting deposits, credit products, and the popular digital wallet service. This action stems from supervisory concerns and non-compliance with regulations, casting a shadow over Paytm's future.

The RBI's ban on new deposits and wallet transactions for Paytm Payments Bank, citing non-compliance, sent the company's shares to a record low of Rs 395 apiece. Paytm is reportedly seeking an extension of the February 29 deadline for compliance and clarification on transferring licenses for its core features like wallets and Fastag.

A Paytm spokesperson denied any violations of foreign exchange law, calling the allegations “unfounded and factually incorrect.”

Analysts at Bernstein said the earlier plunge was an overreaction.

"While the regulatory action will no doubt have a lasting impact on investors' assessment of the business model risk and of the management's ability to handle regulatory risk, we expect the company to successfully execute the operational changes required to overcome the restrictions," analysts at Bernstein wrote in a note.

Bernstein lowered its target price on the stock to Rs 600 from Rs 950, but retained an outperform rating.

(With Reuters inputs.)