Paytm stock extends gains, soars 14% in two sessions; Nuvama sees fintech firm entering F&O segment

One 97 Communications Shares, the parent company of Paytm, built on the previous session's gains by increasing more than 4% on June 10. Over the last two sessions, the stock has surged by 14% as investor interest grew following an adjustment in the circuit filter. The NSE recently raised Paytm's circuit filter from 5% to 10%.

At 10:32 am, Paytm shares were trading at ₹395.35 each, marking a 3.6% increase on the National Stock Exchange (NSE). Year-to-date, the stock has declined approximately 39%, lagging behind the benchmark Nifty 50, which has gained 7.6% in the same timeframe. Over the past year, Paytm shares have fallen by 51%.

According to a note from Nuvama Institutional Equities, Paytm is one of several stocks that could become eligible for inclusion in the futures and options (F&O) segment if the proposed changes to the eligibility criteria for F&O stock selection are implemented.

Importantly, the market regulator SEBI has issued a consultation paper to gather feedback from all stakeholders on updating the eligibility criteria for stock derivatives in accordance with market growth. Derivatives contracts on stocks are tradable on recognized stock exchanges only if the underlying stocks meet specific objective criteria. These criteria were last reviewed in 2018.

"Considering the implications of the said matter on market participants, public comments are invited on the proposal. Comments may be sent to SEBI, latest by June 19, 2024. Post which they will review and should communicate the possible changes in few weeks," Nuvama said.

According to Nuvama, Paytm is on the potential list of stocks that could enter the F&O segment if they meet the proposed criteria, although the final decision rests with SEBI. Paytm recently reported early signs of recovery and robust stabilization in its Unified Payments Interface (UPI) business.

In May, the total value of UPI transactions processed on Paytm increased to ₹1.24 lakh crore, driven by the company's new initiatives for users, such as introducing credit card payments via UPI and promoting UPI Lite. This figure is up from ₹1.22 lakh crore reported in April. With total transactions on the platform stabilizing at ₹114 crore in May, Paytm, which became a Third-Party Application Provider (TPAP) in March, remains the third largest player in terms of market share.

In additional news, Paytm confirmed the layoff of an undisclosed number of employees on June 10. 

According to the statement, the number of employees in Paytm's sales division decreased by approximately 3,500, reducing the total headcount to 36,521 in the March 2024 quarter. This decline is mainly due to the Reserve Bank of India's (RBI) ban on services provided by Paytm Payments Bank.

"One97 Communications Limited (OCL) is providing outplacement support to employees who have resigned as a part of the restructuring efforts by the company," the company stated. The human resource teams at Paytm are reportedly working with over 30 companies that are currently hiring, assisting employees who have chosen to share their information for immediate outplacement. "Paytm is also disbursing bonuses which were due to employees, ensuring fairness and transparency in the process," the statement added.

Starting from March 15, the Reserve Bank of India (RBI) prohibited Paytm Payments Bank Limited (PPBL), an affiliate of Paytm, from accepting deposits, credit transactions, or top-ups in any customer accounts, wallets, and FASTags. This action was taken due to non-compliance issues and supervisory concerns.

"As part of its FY24 earnings release, One97 Communications stated that it will be pruning its non-core business lines and will continue its efforts to maintain a leaner organization structure through AI-led interventions. The company has been actively working towards driving profitability, in line with its guidance," the company stated.