Shares of One 97 Communications Ltd- parent firm of Paytm - tumbled over 13 percent on Monday after the Reserve Bank of India (RBI) asked the Paytm Payments Bank to stop opening new accounts amid "material supervisory concerns" observed in the bank.

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The stock tanked 13.25 percent to Rs 672.10 - the lowest since its listing - on the BSE. At the NSE, it tumbled 13.29 percent to Rs 672.

This is the third time that Paytm Payments Bank is facing action from the banking regulator since its inception in May 2017. It has been prohibited from opening new accounts for the second time.

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Macquarie maintains 'underperform' rating on Paytm, target price at Rs 700

Morgan Stanley said that the near-term impact of this on business should be manageable, however, regulatory uncertainty will weigh on valuation.

We need to see potential implications of the IT audit, and this may take time to get resolved. We expect the regulatory developments to weigh on valuation, as also seen in the cases of other banks facing negative regulatory strictures like HDFC Bank, RBL Bank and Bandhan Bank. This is despite management guiding to no significant earnings impact, according to the brokerage.

Also Read: Paytm shares drop below Rs 675 after RBI bars payments bank from opening new accounts

Morgan Stanley has reduced its target price on Paytm's stock to Rs 935 and has also reduced its rating to 'equal-weight' as the brokerage mark to market their relative valuation as well as introduce bear case weighting.

"We value Paytm using an EV/revenue multiple based on a peer set of US payment and fintech firms. Since our last update, the peer set has declined by ~30 percent. This, coupled with higher bear case weight, drives our PT reduction to Rs935. Post this, we see better returns at peer banks in our coverage and hence move to EW," the brokerage said.

The brokerage also noted that global fintech stocks have continued to derate on various factors, increasing regulatory challenges being one of them; for

Paytm as well, valuation has corrected sharply, but investors should wait for clarity on regulatory uncertainty before buying the stock.

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(Edited by : Akanksha Upadhyay)