(Bloomberg) — Indian regulators ordered the parent company of digital payments provider Paytm to shut down a large part of its business, dealing a serious blow to a high-profile tech pioneer that has spent years tussling with regulators and its Chinese backing. Was struggling with criticism.
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The Reserve Bank of India on Wednesday ordered Paytm Payments Bank Ltd to shut down its popular mobile wallet business along with other activities, citing persistent non-compliance and supervisory concerns.
The sudden action shows that regulators have become dissatisfied with the fintech pioneer and raises the possibility of more action in the future. The order is a major blow to charismatic founder Vijay Shekhar Sharma, just as he is trying to convince investors that Paytm can reverse years of losses and become permanently profitable. Jefferies analysts estimate that the decision could directly and indirectly reduce more than half of its earnings.
“This order significantly hampers Paytm’s ability to retain customers in its ecosystem, and accordingly restricts it from selling payment products and loan products,” Macquarie analysts including Suresh Ganapathy said in a note. ” “The implications for revenue and profitability in the medium to long term could be significant.”
The regulator said the bank branch, which processes transactions for payments giant Paytm, should cease its banking activities after February 29. However, existing customers can withdraw their funds and use the balance in prepaid card or wallet without any restrictions. , RBI said.
The order could directly impact Paytm’s earnings before interest, taxes, depreciation and amortization by up to 30% and indirectly by up to 25% due to the impact on its reputation, Jefferies analysts said in a note. There may be a reduction of up to %. Jefferies cuts its price…