Morgan Stanley Buys Rs 244 Crore Worth of Paytm Shares Amid Stock Decline

Morgan Stanley, through its affiliate Morgan Stanley Asia (Singapore) Pte, seized the opportunity presented by the recent decline in Paytm’s stock, purchasing shares worth Rs 243.6 crore.

The acquisition, involving 50 lakh shares (0.79% stake) at Rs 487.2 per share, was executed through open market transactions on the National Stock Exchange (NSE). This move follows a substantial 36% drop in Paytm’s shares over two sessions, triggered primarily by the Reserve Bank of India’s regulatory actions against Paytm Payments Bank.

RBI’s Strict Measures and Potential License Revocation

The Reserve Bank of India (RBI) directed Paytm Payments Bank Ltd (PPBL) to halt new deposits or top-ups across various instruments, citing potential violations related to customer documentation and non-disclosure of material transactions. Reports suggest that the RBI is contemplating the revocation of PPBL’s license, with a decision expected next month. This regulatory scrutiny has significantly impacted Paytm’s valuation, witnessing a loss of over $2 billion in market capitalization.

Brokerage Firms’ Warnings and Future Outlook

Brokerage firms have cautioned about the potential long-term effects on Paytm’s business and profitability plans due to RBI’s actions and the associated reputational harm. Jefferies, in its analyst commentary, highlighted the impact on the wallet business and merchant payments profitability, estimating a potential 20-30% impact on EBITDA. Additionally, concerns about the lending business, accounting for roughly 20% of revenues, were raised, anticipating significant challenges if lending partners reduce exposure. Jefferies revised down EBITDA estimates for FY25-26 by 45%, leading to a delay in achieving profitability.