" "

'Your money is safe with us': Paytm tells customers after loosing over Rs 17,000 crore in market valuation

author-image
Vivek Vishwakarma
Updated On
New Update
is your money safe on Paytm after rbi action

Following the significant damage to Paytm's market valuation caused by RBI's action, the company has assured its customers that their "money is safe".

In an email and text message to its existing customers, the company said that the RBI directive does not impact their existing balances. "Your money is safe with the Bank," the Paytm Payments Bank said in its "important update".

Vijay Shekhar Sharma expresses gratitude to customers

Advertisment

Not just the company, CEO Vijay Shekhar Sharma also took to X (formerly Twitter) to assure users that Paytm will continue to operate as usual beyond February 29.

"To every Paytmer, your favourite app is working and will keep working beyond February 29," he stated.

"For every challenge, there is a solution, and we are sincerely committed to serving our nation in full compliance," he added.

The damage caused by RBI's action

The RBI's action not only impacted ordinary customers but also significantly damaged the company's market capitalization, with a decline of over $2 billion or Rs 17,000 crore.

As of February 2, 2024, Paytm's market capitalization stands at nearly Rs 31,000 crore, a sharp fall from its IPO valuation of $19 billion.

The RBI's restrictions prevent Paytm Payments Bank from accepting new deposits/top-ups in any customer account, wallets, and FASTags after February 29. This decision was reportedly due to non-compliance with regulatory standards and supervisory concerns.

Complying with RBI directions

Meanwhile, the company also said it is taking immediate steps to comply with RBI directions, including working with the regulator to address their concerns as quickly as possible.

The company said that depending on the nature of the resolution, It expects to have a worst-case impact of Rs 300 to 500 crore on its annual EBITDA going forward.

"However, the Company expects to continue on its trajectory to improve its profitability," Paytm said in an exchange filing.

Brokerage firms warn about Paytm's future

According to analysts, The Reserve Bank of India's action on Paytm and reputation harm can have long-term effects on Paytm's overall business and profitability plans.

“RBI's actions directly impact the wallet business and profitability of merchant payments business, which can impact Ebitda (earnings before interest, taxes, depreciation and amortisation) by 20-30%. We see the impact being much larger due to reputational concerns around the group,” said Jefferies in its analyst commentary.

“Lending business (roughly 20% of revenues) can be significantly hit if lending partners cut back or limit their exposure. These drive us to cut FY25-26 Ebitda estimates by 45%, which will also delay profitability,” the investment banking firm added.

Goldman Sachs on the other hand said that their key concern is that RBI has not so far given any potential steps towards a resoltution. "This suggests to us that the directive could stay in place for the foreseeable future," the American firm said. 

Join our new WhatsApp Channel for the latest startup news updates

Subscribe