Six Mutual Funds Fully Exit Paytm Stock; Six Significantly Reduce Stake in February

In February, mutual funds made adjustments to their investments in One97 Communications Ltd, the parent company of Paytm following regulatory actions by the Reserve Bank of India (RBI). Six mutual funds including Mahindra Manulife Mutual Fund with 15.16 lakh shares, Bajaj Finserv MF with 2.1 lakh shares, Quant Mutual Fund with 6.13 lakh shares, JM Financial MF with 1.67 lakh shares, Baroda BNP Paribas MF with 17,000 shares, Union MF with 1.15 lakh shares have entirely exited their investments in Paytm stock. Collectively, they sold over 91 lakh shares valued at ₹380 crore. 

Motilal Oswal MF led the selling charge by selling 27.14 lakh shares worth ₹113 crore. Following closely were Aditya Birla Sun Life and Mahindra Manulife MF each selling over 15 lakh shares valued at ₹63 crore. Other mutual funds like UTI ₹47 crore, Franklin Templeton ₹29 crore, Quant ₹26 crore and Nippon sold shares worth about ₹16 crore.

Paytm Stock Performance 

In February, Paytm's stock took a nosedive of over 50 percent due to concerns raised by the Reserve Bank of India considerd revoking the license of Paytm Payments Bank. RBI pointed out several lapses, such as transactions exceeding prescribed limits, sparking worries about potential money laundering activities. With the central bank imposing restrictions on much of its operations, Paytm finds itself grappling with challenges tarnishing its once glowing reputation as a leading fintech startup.

Although the company and its founder have reassured investors that they are not under investigation by anti money laundering authorities investor concerns persist. Recently, Macquarie downgraded One 97 Communications to "underperform," significantly reducing the target price from ₹650 to ₹275. Analyst highlights a looming risk of customers abandoning Paytm following the RBI's restrictions on its payments bank which could severely impact monetization and the overall business model. The new target price represents a sharp 33% decrease from the previous closing price. Analyst also forecasts a substantial increase in losses estimating a rise of 170% for FY25E and 40% for FY26E also anticipates a significant decline in revenues ranging from 60 to 65 percent, primarily due to reduced payments and distribution revenue.

To Summarize

The scrutiny of Paytm by regulators is causing concern among investors. Mutual funds are pulling out and reducing their stakes showing that investors are worried about Paytm's future. Analysts are also downgrading Paytm, suggesting that the company might struggle to deal with regulatory issues and keep its business going smoothly in uncertain times.