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The Reserve Bank of India's (RBI) clampdown on Paytm Payments Bank in January sparked an uproar in the domestic mutual fund market. Unsurprisingly, several schemes, 22 to be precise, exited their stakes in One 97 Communications (Paytm) , while a few others reduced their investment significantly in February.
However, as many as 22 mutual funds remain unmoved by the current crisis, even as the fintech company's share price plummeted by around 53 per cent.
We'll come to these funds later. Before that, let's look at some significant funds that dropped Paytm like a hot potato.
Complete exit
Of the 22 funds that dumped Paytm, four of them - Motilal Oswal Large and Midcap Fund, JM Large Cap Fund, Motilal Oswal ELSS Tax Saver Fund and Navi Large and Mid Cap Fund - had a sizable allocation of over 2 per cent in the Noida-based fintech company.
Cash out
These funds made a complete exit from One 97 Communications
| Scheme name | Portfolio allocation (in %) |
|---|---|
| Motilal Oswal Large and Midcap Fund | 3.85 |
| JM Large Cap Fund | 3.11 |
| Motilal Oswal ELSS Tax Saver Fund | 2.65 |
| Navi Large & Midcap Fund | 2.35 |
| Franklin India Equity Advantage Fund | 1.71 |
| JM ELSS Tax Saver Fund | 1.69 |
| Mahindra Manulife ELSS Tax Saver Fund | 1.66 |
| JM Value Fund | 1.66 |
| Mahindra Manulife Flexi Cap Fund | 1.63 |
| Note: Only considered funds that had at least a 1.5 per cent holding as of January 2024. | |
One of the fund managers who exited Paytm spoke to Value Research on condition of anonymity: "The decision was taken based on two key premises. First, the regulatory action of the Paytm Bank is likely to shift merchants to other players, which could impact their profitability. Second, being under the regulatory radar, even their lending partners might not do business with them. All these factors will lead to no earnings visibility in the near future."
He also added that it becomes very difficult for businesses to make money if the regulator is rubbed the wrong way.
Partial exit
As mentioned earlier, five funds reduced their exposure to Paytm.
They are Aditya Birla Sun Life Digital India Fund, Nippon India Banking & Financial Services Fund, Nippon India Innovation Fund, UTI Innovation Fund and UTI Mid Cap Fund. The latter three had a meaningful paring down; the first two funds showed a marginal reduction.
The no-exit funds
Let's now talk about the funds that continue to hold the same number of shares despite the RBI-Paytm brouhaha.
Among the 22 funds, there are eight that have over 1 per cent allocation in the new-age fintech company. As you can see in the table below, they include four Mirae Assets' funds, Motilal Oswal Focused Fund, Helios Flexi Cap Fund and Franklin India Technology Fund.
Waiting and watching
These funds have not sold any shares since the Paytm-RBI crisis
| Scheme name | Number of shares | Portfolio allocation (In%) | ||
|---|---|---|---|---|
| Jan-24 | Feb-24 | Jan-24 | Feb-24 | |
| Mirae Asset Focused Fund | 42,35,150 | 42,35,150 | 3.56 | 1.97 |
| Motilal Oswal Focused Fund | 6,41,800 | 6,41,800 | 2.65 | 1.44 |
| Helios Flexi Cap Fund | 2,44,170 | 2,44,170 | 2.05 | 1 |
| Franklin India Technology Fund | 2,63,460 | 2,63,460 | 1.57 | 0.78 |
| Mirae Asset Large Cap Fund | 67,72,500 | 67,72,500 | 1.36 | 0.72 |
| Mirae Asset Mid Cap | 25,02,330 | 25,02,330 | 1.33 | 0.69 |
| Mirae Asset ELSS Tax Saver Fund | 28,28,000 | 28,28,000 | 1.03 | 0.54 |
| Mirae Asset Large & Midcap Fund | 44,26,290 | 44,26,290 | 1.01 | 0.53 |
| Note: Considered funds that have retained their number of shares and had more than 1 per cent holding as of January 2024. | ||||
One of the unnamed fund managers still holding on to these stocks pointed out to us that the RBI has clearly stated they don't have any problems with the company but with one of its entities (Paytm Payments Bank).
Another fund manager, requesting anonymity, said they are waiting till March 15 "to get more clarity". "Future decisions will be taken once we see some announcements on March 15," they said.
Significance of March 15
Earlier, the RBI had barred Paytm Payments Bank from allowing "further deposits, credit transactions or top-ups in any customer accounts, prepaid instruments, wallets, FASTags, NCMC cards, etc., after February 29, 2024, other than any interest, cashback, or refunds that may be credited anytime".
The February 29 deadline was later extended to March 15, 2024.
RBI has come down hard on Paytm for "persistent non-compliances" and "continued material supervisory concerns in the bank".
Also read: Paytm mat karo
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