Paytm Gets Government Nod for Investment in Payments Arm; Stock Soars 10%
- ByStartupStory | July 27, 2024
Paytm, one of India’s leading fintech companies, has received government approval for a ₹500 million ($5.97 million) investment in its key subsidiary, Paytm Payment Services. This green light marks the end of months of delay caused by the company’s ties to China and clears the way for the subsidiary to resume normal business operations.
A top finance ministry official confirmed the news to Reuters on Friday. Following the approval, shares of One97 Communications, the parent company of Paytm, surged 10 percent and were locked in the upper circuit at ₹509.05 on the NSE. This marks the first time since February 8 that Paytm shares have surpassed the ₹500 level.
Paytm Payment Services is a crucial part of the fintech firm’s business, contributing to a quarter of its consolidated revenue in the financial year ending March 2023. The government’s nod is expected to boost the unit’s operations significantly.
Vivek Joshi, Financial Services Secretary, commented on the development: “The company can approach India’s central bank to seek a payment aggregator license which the bank will evaluate.”
The approval comes as a relief for Paytm, which has been under pressure since February due to the Reserve Bank of India’s (RBI) action against its Payments Bank. Earlier this month, Reuters reported that the government had given the investment the green light.
In the June quarter, Paytm’s revenue dropped by 36 percent year-over-year to ₹1,502 crore, largely due to ongoing challenges from RBI restrictions. The company’s net loss also widened sharply to ₹840 crore in Q1 of FY25, the steepest loss since its listing.
Shares of the payments aggregator had previously reached levels as high as ₹800 in January. However, since then, the stock has struggled to recover to that mark.
With the recent government approval, Paytm aims to strengthen its position in the fintech industry and address the regulatory challenges it has faced in recent months. The company’s next step will be to seek a payment aggregator license from India’s central bank, a crucial move for its future operations.
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