Paytm Payments Bank: Macquarie shares view on Vijay Shekhar Sharma resignation
Paytm withdrew its nominee from the Paytm Payments Bank board and its founder Vijay Shekhar Sharma stepped down as part-time non-executive Chairman and board member of the associate company.
Foreign brokerage Macquarie has reportedly maintained its ‘Underperform’ rating on One 97 Communications Ltd (Paytm) with a target of Rs 275, as the foreign brokerage believe the survival of Paytm Payments Bank is in question, even as Vijay Shekhar Sharma resigned from the bank board.
Macquarie, as per ET NOW, said Sharma is trying to salvage some value from PPBL and by stepping down from the board he was sending a message to the RBI that he is willing to give up control of PPBL. Macquarie said the RBI would have to provide some relaxation to PPBL in order to ensure survival but the broking firm does not expect the central bank to authorize any related party transactions between Paytm and PBBL in the future, ET NOW reported.
The Macquarie note came as Paytm in a filing to stock exchanges said PPBL’s future business would be led by a reconstituted board, which would be led by ex-Central Bank of India Chairman Srinivasan Sridhar, retired IAS Debendranath Sarangi, former Executive Director of Bank of Baroda Shri Ashok Kumar Garg, and retired IAS Rajni Sekhri Sibal.
Paytm said it supports the payments bank’s move of opting for a board with “only independent and executive directors by removing its nominee.” Paytm said it was separately informed that Sharma has also resigned from the Board of Paytm Payments Bank to enable this transition. PPBL has informed us that they will commence the process of appointing a new Chairman,” Paytm said.
Macquarie, as per ET NOW, said that some lending partners are looking again at their relationship with Paytm and that its lending business may take a hit if partners scale down or terminate their relationship with Paytm.
The RBI had last week asked the National Payments Corporation of India (NPCI) to examine a request from Paytm that sought becoming a third party application provider. This is after the RBI stopped PPBL from taking any fresh deposits or credit transactions or top-ups in any customer accounts, prepaid instruments, wallets, FASTags, and NCMC cards.
Why Vijay Shekhar Sharma Quit
Mr Sharma owns a 51 per cent stake in Paytm Payments Bank while One 97 Communications, as Paytm was formally known, owns the rest. Mr Sharma said that his resignation from the board and the appointment of independent directors were strategic steps to enable a smooth transition and enhance governance structures. The move is also seen as an attempt to disassociate Paytm from its payments bank unit and position it as an independent entity.
The regulatory challenges faced by Paytm have impacted its stock value, with a significant drop since the RBI’s order. However, the stock has shown signs of recovery, attributed to Paytm’s partnership with new banking entities and the RBI extending the deadline for winding down the payment bank’s operations.
Nirmala Sitharaman’s Action
Finance Minister Nirmala Sitharaman on Monday convened a meeting with representatives from the fintech industry to discuss their concerns and issues. However, the developments at Paytm Payments Bank were not specifically addressed during this meeting, according to two government officials who were present, reports Reuters.
In response to the crisis, the finance ministry has announced plans to hold discussions with Indian law enforcement agencies and fintech firms in the near future. This upcoming meeting aims to facilitate communication between fintech firms and various enforcement agencies, as mentioned in a statement released by the ministry.
The concerns raised by some listed fintech companies regarding their ownership structures will be examined by both the central bank and the government. This move signals a broader effort to enhance transparency and accountability in the fintech sector.
Additionally, the government has pledged to simplify ‘know your customer’ (KYC) norms across the fintech space. Simplifying KYC requirements could streamline onboarding processes for users, potentially addressing some of the operational challenges faced by fintech firms.
With Thanks Reference to: https://www.businesstoday.in/markets/company-stock/story/paytm-payments-bank-macquarie-shares-view-on-vijay-shekhar-sharma-resignation-419043-2024-02-27 and https://www.ndtv.com/business-news/explained-why-paytm-ceo-vijay-shekhar-sharma-quit-payments-bank-board-5134319
