By Siddhi Nayak
MUMBAI (Reuters) -Paytm's chief executive met the Indian finance minister on Tuesday, according to two sources who were aware of the development, days after the banking regulator ordered its payment bank to halt business, leading to a share price rout.
Earlier in the day, Reuters had reported that CEO Vijay Shekhar Sharma and a few Paytm officials had met the Reserve Bank of India (RBI) on Monday to discuss regulatory concerns.
The meetings come after the RBI asked Paytm Payments Bank last Wednesday to stop accepting new deposits in its accounts and its popular digital wallets from March, citing supervisory concerns and non-compliance with rules.
"Discussions are on about addressing the regulatory concerns and compliance issues with both the RBI and the ministry," said one of the sources.
The company has sought an extension of the Feb. 29 deadline from the RBI and has also been seeking clarity from the central bank regarding the transfer of its licence for the wallets business and digital highway toll payment service Fastag, the source said.
"The RBI heard Paytm out without making any commitments," a second source said.
Paytm, RBI and the finance ministry did not immediately respond to Reuters' request for comment.
As of Monday, Paytm's shares had fallen about 42%, wiping $2.5 billion off its market value on concerns about the impact on the wider business, as Paytm Payments Bank powers most features of the digital payments app, which competes with the likes of Walmart (NYSE:WMT)'s PhonePe and Google (NASDAQ:GOOGL).
The stock hit a record low early on Tuesday following a Reuters report that India's federal anti-fraud agency was investigating if platforms run by the company have been involved in violations of foreign exchange rules.
A Paytm spokesperson denied any violations of foreign exchange law, calling the allegations "unfounded and factually incorrect".
The RBI's regulatory clampdown could also be a precursor to Paytm's licence being cancelled, a source familiar with the matter said last week.
Paytm's shares reversed some losses on Tuesday to close 2.9% higher at 451.15 rupees, after rising as much as 8% earlier in the day.
Avinash Gorakshakar, head of research at Profitmart Securities, said the share move could be a "dead-cat bounce" after the recent rout, pointing to the amount of negative news still overhanging the stock.
Bernstein lowered its target share price to 600 rupees from 950 rupees, but retained an outperform rating.
"While the regulatory action will no doubt have a lasting impact on investors' assessment of the business model risk and of the management's ability to handle regulatory risk, we expect the company to successfully execute the operational changes required to overcome the restrictions," Bernstein analysts said.
($1 = 83.0325 Indian rupees)