Paytm shares get relief, rebound 17% from day's low. Here's why

One 97 Communications Ltd (Paytm) on Tuesday saw its shares rising for the first time in five sessions as the company denied speculations that it, along with its associate company and CEO and founder, were being investigated by government agencies for possible violation of foreign exchange rules and money laundering. 

Paytm shares rose 7.19 per cent to hit a high of Rs 438.35 on BSE. The stock was in fact up 18.81 per cent  over its day's low of Rs 395.50. Paytm was locked at its lower circuit limits in the previous three sessions. To curb volatility, stock exchanges had earlier cut the stock's price band limit to 10 per cent from 20 per cent.

Also read: Jio Financial shares tanked 7% today; firm says no talks with Paytm on wallet biz

Paytm said that the media reports suggesting investigation into the violation of foreign exchange rules by Paytm or its associate Paytm Payments Bank Limited (PPBL), were baseless speculations. Earlier, Paytm had denied any investigation by the Enforcement Directorate on OCL, its associates and management. 

The rumours spread after the RBI put severe restrictions on Paytm Payment bank operations, citing non-compliance with KYC guidelines and other issues. Paytm has suggested that the RBI curbs would not impact user deposits in their Wallets, FASTags, NCMC accounts and savings accounts.

Paytm said the users can continue to use the existing balances and added that it was taking immediate steps to comply with RBI directions, including working with the regulator to address their concerns as quickly as possible.

'"he company has been informed that this does not impact user deposits in their savings accounts, Wallets, FASTags, and NCMC accounts, where they can continue to use the existing balances," the company said last week.

A host of brokerages cut their target prices on the stock last week. The lowest target among them stood at Rs 500 by Jefferies. Macquarie, which suggested target of Rs 650 on the stock, warned of serious implications of the RBI move, saying it would hamper Paytm's ability to retain customers in its ecosystem.

Paytm had earlier announced its plan to downsize its BNPL operations. It was said to be working to mitigate the impact by scaling up higher-ticket Personal and Merchant loans. Against that backdrop, Motilal Oswal said the fresh RBI measures raised serious concerns over Paytm's business outlook and dented overall investor confidence.

Also read: BLS E-Services shares turn multibagger on BSE, NSE listings; stock debuts at 130% premium