Why Vijay Shekhar Sharma resigned as Paytm Payments Bank chairman

Vijay Shekhar Sharma, the founder and CEO of Paytm, has stepped down from his role as part-time non-executive chairman and board member of Paytm Payments Bank Limited (PPBL). This decision comes nearly a month after the Reserve Bank of India (RBI) initiated regulatory action against the bank.

One97 Communications Limited, the parent company of Paytm, disclosed the development, emphasizing that Sharma's resignation is aimed at facilitating a smooth transition within PPBL's leadership structure. The company's statement suggests that this transition is imperative amid the regulatory scrutiny faced by PPBL.

Following the announcement, brokerage firm Macquarie released a note interpreting Sharma's resignation as an attempt to "salvage some value from Paytm Payments Bank" by signaling a willingness to relinquish control. The note also underscores the critical role of regulatory decisions in determining PPBL's future viability, suggesting that the bank's survival hinges on potential relaxations from the RBI for its banking operations.

Macquarie's analysis further speculates on the potential outcomes for Paytm, suggesting that if PPBL is permitted to operate independently, it could yield additional profitability for the parent company. Despite this optimistic scenario, the brokerage maintains an "underperform" rating on Paytm's stock with a target price of Rs 275, having downgraded it just two weeks prior.

Market sentiment towards Paytm appears mixed, with an average "hold" rating from 13 analysts. Notably, at least two brokerages have ceased coverage of the stock entirely, reflecting uncertainties surrounding the company's future trajectory amidst regulatory challenges.

In response to these developments, Paytm shares saw a modest uptick of 1.40 per cent on the Bombay Stock Exchange (BSE), trading at Rs 434.10 apiece as of 10:30 am. The market reaction underscores investor interest and anticipation regarding the implications of Sharma's resignation and its broader ramifications for Paytm's operations and valuation.