Indian central bank’s clampdown wipes $2.1 billion off Paytm

Shares of Paytm fell another 20% Friday before hitting the lower circuit that temporarily halts trading as the Indian financial services firm reels from the clampdown by the central bank.

Paytm fell to 487 Indian rupees, or $5.88 within minutes of the market opening, the lowest it has hit in 55 weeks. Paytm shares also fell 20% on Thursday. Paytm, which currently has a market cap of $3.73 billion, has lost $2.1 billion in its market cap in two days.

The Reserve Bank of India (RBI) this week widened its curbs on Paytm’s Payments Bank, which processes transactions for financial services giant Paytm, barring it from offering many banking services, including accepting fresh deposits and credit transactions across its services. In response, Paytm said it will terminate business with its affiliate and seek partnership with other banks.

Even as Paytm insists that the RBI’s direction will, at worst, erase $60 million from its annual EBITDA, the market at large is reading the situation differently.

At $3.7 billion market cap, Paytm is being valued at less than a third of its private rival, Walmart-backed PhonePe. PhonePe, which raised $850 million last year at a valuation of $12 billion, does less than half of Paytm’s revenue. Also, Paytm has raised more than $5 billion in private rounds and IPO.

Market analysts are having a tough time revising their price target for the Paytm stock. Morgan Stanley in a note to clients Friday said it was cutting its price target of Paytm to 555 Indian rupees, from 690 on Thursday.

More to follow.

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