Small investors raised stakes sharply in Paytm in Q3. Then came RBI’s curbs

livemint.com:

MUMBAI : Small investors have been hit hard by the plunge in shares of One97 Communications (Paytm) since the Reserve Bank of India issued curbs on associate Paytm Payments Bank over repeated non-compliance with regulations. Retail investors sharply hiked their stake in Paytm to 12.85% during the December quarter from 8.28% in the preceding three months. Market experts believe that in the absence of clarity on the fate of the payment bank’s operations, the near-term outlook for the company remains bleak.

Many new retail investors hopped on to the counter in the hope of reaping high returns. This is borne out by the number of retail investors holding up to ₹2 lakh each of the firm’s equity capital jumping to 1.1 million in Q3 from 990,819 in the preceding quarter. A year ago, in December 2022, small investors’ holding was lower at 9.24%.

The recent fall in share price would thus have come as a rude shock to the new and existing investors . The Paytm share plummeted 45% to ₹419.85 apiece on Friday from ₹761.20 on 31 January, over just seven trading sessions, after RBI stopped most operations of the payments bank. The stock hit the lower circuit for three consecutive sessions post the regulatory action.

After two sessions of hitting the 20% lower circuit, exchanges halved the circuit limit, which was tested on the third session. Corporate governance advisory professional and brokers said that though financial services firm Morgan Stanley purchased five million shares of One97 on 2 February for ₹243.6 crore in a bulk deal on behalf of offshore entities who aren’t registered in India, retail investors shouldn’t raise their stake or enter the counter at lower levels pending the uncertainty over the firm’s business. “Investors