Explanation for the 20% decline in Paisalo Digital shares

Paisalo Digital shares witnessed a significant decline of 20 percent following a recent ruling by the Delhi High Court regarding alleged unfair lending practices.

The stock plummeted to Rs 139.75, marking a notable drop from its recent high of Rs 199.25 on March 1. Despite this downturn, the company's shares have still demonstrated a remarkable increase of 232.66 percent compared to their lowest value over the past year.

In response to concerns about high volatility, both the BSE and NSE stock exchanges have placed Paisalo's securities under the long-term ASM (Additional Surveillance Measure) framework. Additionally, the stock is scheduled to trade ex-bonus on March 20th at a 1:1 ratio.

The Delhi High Court's action against Paisalo stems from accusations of charging excessively high-interest rates, with allegations of 125 percent interest per annum on loans. The petitioner claims that a loan of Rs 15.9 crore in May 2019 had escalated to Rs 23 crore by June of the same year.

Addressing these allegations, the Securities and Exchange Board of India (SEBI) clarified its regulatory role, emphasizing that it does not oversee the lending practices of Non-Banking Financial Companies (NBFCs), but rather focuses on its role as a market regulator.

Paisalo has been granted four weeks to respond to the allegations. In its defense, the company stated that there is no specific order directing any regulator to investigate unfair lending practices.

Furthermore, Paisalo highlighted a loan default case involving M/s Sat Priya Mehamia Memorial Educational Trust, Rohtak, alleging that the trust failed to repay a loan of Rs 12 crore taken in March 2018. Despite legal actions taken against the borrower, Paisalo claimed that the trust continued to sell off mortgaged properties in violation of court orders.

As of December 2023, the company's promoters held a 48.86 percent stake in the company.

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