In a notable shift for the fintech giant, domestic mutual funds (MFs) have reduced their stake in Paytm (One97 Communications) to 14.34% during the December quarter of 2025 (Q3 FY26).
This marks the first time that mutual funds have trimmed their holdings in the company since its stock market debut in November 2021, ending a three-year streak of consistent accumulation.
1. The Institutional Exodus
The reduction from 16.25% in the September quarter to 14.34% in the December quarter reflects a turning point in institutional sentiment.
- Key Sellers: Prominent fund houses that pared their exposure include Motilal Oswal MF, Nippon India MF, and Mirae Asset MF.
- Complete Exits: Bandhan MF, which previously held a 1.04% stake, disappeared from the major shareholder list, indicating either a complete exit or a reduction below the 1% mandatory disclosure threshold.
- Retail Selling: Smaller retail investors (holding up to ₹2 lakh) continued to offload shares for the seventh consecutive quarter, bringing their ownership to its lowest level since September 2023.
2. The “PIDF” Headwind
Market analysts attribute this sudden caution to the expiration of a critical regulatory incentive.
- End of PIDF: The Reserve Bank of India (RBI) ended the Payment Infrastructure Development Fund (PIDF) scheme on December 31, 2025.
- Profit Impact: This scheme provided subsidies for deploying Soundboxes and QR codes. Reports suggest these incentives accounted for roughly 20% of Paytm’s operating profit, leading to a “valuation recalibration” by fund managers as the company moves to a self-funded expansion model.
3. Financial Performance: A Mixed Bag
Despite the institutional sell-off, Paytm’s Q3 FY26 financial results (released in late January 2026) showed operational resilience.
| Metric | Q3 FY26 (Dec 2025) | YoY Change |
| Operating Revenue | ₹2,194 Crore | ↑ 20% |
| Net Profit (PAT) | ₹225 Crore | ↑ ₹433 Cr (from loss) |
| Contribution Margin | 57% | ↑ 500 bps |
| Cash Balance | ₹12,882 Crore | Strong Liquidity |
4. Market Reaction & Rebound
The stock experienced intense volatility in early 2026 but saw a sharp recovery following the Union Budget on February 1.
- Budget Boost: Shares surged nearly 22% from their intraday lows after the government announced a ₹2,000 crore subsidy for UPI and RuPay for the upcoming fiscal year.
- Current Standing: As of February 4, 2026, the stock was trading near ₹1,206, representing a massive 334% recovery from its record low of ₹318 in 2024, though it remains roughly 40% below its IPO price of ₹2,150.
Conclusion: A Shift to Quality over Quantity
The mutual fund stake reduction suggests that institutional investors are moving from “blind accumulation” to a more disciplined, performance-based holding strategy. While the loss of PIDF incentives creates a short-term margin hurdle, Paytm’s pivot to an AI-first product strategy and its growing merchant subscription revenue (reaching 1.44 crore devices) remain the core reasons why many brokerages still maintain “Buy” ratings.
