Paytm Shares Soar 5% Today: Noteworthy 41% Surge Since February 16 Low

Paytm experienced a positive upswing in the stock market despite the ongoing challenges the company is facing. On Tuesday, the parent company, One 97 Communications Ltd, saw a 5% increase in its shares for the third consecutive session. This followed the announcement of Vijay Shekhar Sharma, the founder of Paytm, stepping down as the non-executive chairman of Paytm Payments Bank (PPBL) to facilitate the bank's transition. While the Paytm stock initially hit its circuit limit at Rs 449.30 on BSE, it later dipped to trade at Rs 425.50. Foreign brokerage Macquarie, however, maintained a 'underperform' call on the stock with a target of Rs 275.

Paytm shared that PPBL's future business will be overseen by a reconstituted board, led by individuals like ex-Central Bank of India Chairman Srinivasan Sridhar. The stock has seen a 33% rise from its low on February 16.

Macquarie suggested that Sharma's move to step down signals an attempt to salvage value from PPBL and send a message to the RBI about relinquishing control. While there is an expectation of potential relaxation from the RBI for PPBL's survival, Macquarie does not foresee authorization for future related-party transactions between Paytm and PPBL.

In response to recent changes, Paytm stated, “OCL supports PPBL’s move of opting for a board with only independent and executive directors by removing its nominee. The Company has been separately informed that Vijay Shekhar Sharma has also resigned from the Board of Paytm Payments Bank to enable this transition. PPBL has informed us that they will commence the process of appointing a new Chairman.”

Last week, the RBI directed the NPCI to assess Paytm's request to become a third-party application provider. This followed the RBI's restriction on PPBL from undertaking new deposits or credit transactions. Reports suggest that Paytm might collaborate with HDFC Bank, YES Bank, SBI, and Axis Bank for processing transactions through UPI. Additionally, HDFC Bank and YES Bank reportedly applied for the TPAP role with the NPCI for running the UPI platform.