Shares of Paytm opened in the green and rose 3.87% in early morning trade on Friday after the Vijay Shekhar Sharma-led payments company announced final separation from its affiliate Paytm Payments Bank.

The One97 Communications Board has approved the termination of various intercompany agreements with Paytm Bank Limited (PPBL), the company said. The current decision comes after Sharma said on February 27, 2024 that he would step down as part-time non-executive chairman and board member as part of Paytm Bank's restructuring.

“One 97 Communications Ltd (Paytm) and PPBL announce additional measures to pursue independent future plans – Paytm and PPBL have mutually agreed to terminate various cross-company agreements. One 97 Communications Ltd (Paytm) wishes to inform that the company and its associate “Paytm Payments Bank Limited (PPBL) has introduced additional measures to strengthen its approach to independent operations of PPBL,” it said in a stock exchange filing.

One97's board had formed a committee on February 12, 2024 to work with its board to strengthen compliance following the RBI's decision against Paytm Bank. It formed a group advisory committee chaired by former SEBI chairman M Damodaran to work with the board to further strengthen compliance. One97 has also withdrawn its nominee from the board of Paytm Bank and its future business will be led by an entirely new board.

As part of the company's efforts to reduce dependencies, both companies have “mutually agreed to discontinue various intercompany arrangements with Paytm and its group entities,” according to Paytm. Paytm Payments Bank, 51% owned by Sharma and 49% owned by One 97, will be barred from accepting further credits to its customer accounts and wallets from March 15, 2024.

Additionally, Paytm Bank shareholders will simplify the Shareholders' Agreement (SHA) to support the governance of PPBL independently of its shareholders, the statement said.

One97's board of directors agreed to terminate the agreements and amend SHA on March 1, 2024. Paytm had earlier announced that it would forge new partnerships with other banks and take measures to provide seamless services to its customers and merchants.

In its notification to stock exchanges dated February 1, 2024, the company had noted that the current decision may have a financial impact of ₹300-500 crore on EBITDA per annum. One 97 assures its customers and shareholders that its key services such as Paytm App, Paytm QR, Paytm Soundbox and Paytm Card ATMs will continue to function uninterrupted.

Meanwhile, Paytm stock opened at ₹413.55 and soon rose to the intraday high of ₹423, taking its M-cap to ₹26,558.69 crore. The RBI, meanwhile, gave Paytm a breather last week when it advised the National Payments Corporation of India (NPCI) to consider One97's application to become a third-party application provider (TPAP) for the UPI channel UPI continues operations. The RBI was of the view that it will minimize concentration risk in the UPI system by multiple payment app providers.