Paytm shares jump 10%, take 2-day rally to 13%. Here's why

Shares of One 97 Communications Ltd (Paytm) climbed nearly 10 per cent in Wednesday's trade, taking its two-day gains to 13 per cent, as media reports emerged suggesting the CEO Vijay Shekhar Sharma met Finance Minister Nirmala Sitharaman and the Reserve Bank of India (RBI) officials in the wake of restrictions on Paytm Payments bank. 

The Paytm stock rose 9.77 per cent to hit a high of Rs 495.75 on BSE. As per a media report,  total of 21 lakh Paytm shares worth Rs 103 crore, accounting for 0.3 per cent of total equity,  changed hands on the counter so far.

The rally meant the Paytm stock is up 13 per cent in two sessions. Paytm shares are still off 34.85 per cent from the Rs 761 level, at which they traded at the time of RBI strict measures. 

In an updated note, Bernstein yesterday maintained its 'Outperform' rating on the stock with a target of Rs 600 per share, as it felt that the stock was near its 'doomsday valuations. While the regulatory actions will have a lasting impact on investors' assessment of the business model risks, Bernstein expected Paytm to successfully execute the operational changes needed to over the RBI strictions.

UBS recently said that key area where the Paytm management would be delivering over the next one month to curb disruption is migrating customer UPI handles of PPBL to another bank.  UBS said the RBI had previously given a one-time dispensation and that a failure to do this may result in customer churn for Paytm.

A report by Economic Times, meanwhile, quoting people familiar with the matter suggested the Directorate of Enforcement (ED) is likely to initiate a formal probe into Paytm to investigate issues flagged in the reference from the Reserve Bank of India (RBI). Paytm had earlier denied reports suggesting ED was investigating against the company, its associate Paytm Payments Bank or CEO.

It had also denied reports of investigation or violation of Foreign Exchange rules by Paytm or its associate Paytm Payments Bank.  The Paytm stock has been under pressure since the RBI announced restrictions on Paytm Payments Bank’s operations amid persistent non-compliances and continued material supervisory concerns.

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