JEFFERIES Financial Group has become the first major foreign brokerage to drop coverage on Paytm-operator One 97 Communications until the news flow around the struggling Indian fintech major “settles down”.

The investment bank has moved the stock to “not rated”, weeks after lowering it to underperform after the Reserve Bank of India last month ordered Paytm Payments Bank (RBI) to halt its key operations, citing non-compliance. Paytm has seen its shares lose more than half of their value since the banking regulator’s surprise clampdown amid concerns over the continuity of its business model.

“Without a banking license, Paytm’s business model will now become similar to pure payment service providers,” analysts Jayant Kharote and Prakhar Sharma wrote in a Feb 18 note. “Paytm’s focus will now move to ensuring customer retention, and we believe it will dip” into its 85 billion rupees (S$1.4 billion) cash reserves for spends on retaining users, the analysts said.

The Noida-headquartered company has tied up with Axis Bank to replace affiliate Paytm Payments Bank to continue its merchant payments settlement operations, allowing it a shot to stay in business. Paytm’s shares jumped by their 5 per cent daily limit in Monday (Feb 19) trading.

Meanwhile, the RBI last week granted Paytm an extension of the deadline to wind down much of its business. The company has been given until Mar 15 to stop accepting new deposits, from Feb 29 earlier. BLOOMBERG