Paytm shares plunge to record low after ED notice

Paytm shares plunge to record low after ED notice

Paytm shares continued to slide on Thursday, hitting a new 52-week low of ₹325.30, as the company confirmed that it had received a notice from the Enforcement Directorate (ED) over alleged violations of foreign exchange rules. The stock has fallen 10% in each of the previous two sessions.

Paytm share price drops 5% to hit 52-week low as it confirms receiving ED notice (Agencies)

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Paytm said in a regulatory filing that it had received a show-cause notice from the ED on February 12, 2024, under the Foreign Exchange Management Act (FEMA), 1999. The notice relates to certain transactions involving foreign direct investment (FDI) in the company between 2009 and 2015. Paytm said it was in the process of submitting its response to the ED and would cooperate with the authorities.

The ED notice is the latest setback for Paytm, which has been facing regulatory hurdles and investor skepticism since its blockbuster initial public offering (IPO) in November 2023. The company raised ₹18,300 crore in the largest IPO in India’s history, but its shares have lost more than 60% of their value since then.

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Paytm’s woes intensified last week, when the Reserve Bank of India (RBI) barred its payments bank arm from opening new accounts and e-wallets after finding deficiencies in its compliance with anti-money laundering and know-your-customer norms. The RBI also imposed a penalty of ₹10 crore on Paytm Payments Bank for violating the same rules in 2019.

The disappointing GDP figures cast doubt on the Bank of Japan’s (BOJ) plan to exit its ultra-easy monetary policy later this year. The BOJ has signaled that it will consider tapering its massive stimulus program, which has kept interest rates at or below zero and flooded the financial system with cash. The BOJ expects inflation to gradually pick up and the economy to return to its pre-pandemic level by 2024.

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Paytm’s founder and CEO, Vijay Shekhar Sharma, has been trying to reassure investors and customers about the company’s prospects and performance. He has claimed that Paytm is on track to achieve profitability and growth in its core businesses of payments, commerce, and financial services. He has also said that the RBI’s action on the payments bank was a temporary issue and that the company was working to resolve it.
However, analysts and market experts remain skeptical about Paytm’s valuation and business model, which relies heavily on cashbacks and subsidies to acquire and retain customers.
They also point out that Paytm faces stiff competition from rivals such as PhonePe, Google Pay, Amazon Pay, and WhatsApp Pay, which offer similar or better services at lower or no cost.

Source : MINT News

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