Paytm Falls 3% After Hitting Upper Circuit For Four Sessions

Shares of One97 Communications, the parent entity of fintech major Paytm, fell after four sessions of gains on Thursday (February 22). The stock, which surged 21% in the last four sessions, dropped 3.74% to INR 380.45. 

This followed Goldman Sachs cutting the target price to INR 450 from INR 860 per share. The foreign brokerage foresees a near-term lending slowdown following the recent RBI directive imposing strict restrictions on Paytm Payments Bank (PPBL). 

As a result, analysts at Goldman Sachs have reduced revenue and adjusted EBITDA estimates for FY24E-26 by up to 36% and 80%, respectively. They now anticipate a 21% year-on-year decline in FY25 revenues, in contrast to the previous projection of a 16% growth.

Paytm’s stock faced a downturn after January 31 when the RBI imposed stringent restrictions on Paytm Payments Bank. The RBI issued a directive restricting Paytm Payments Bank from conducting various transactions, including deposits, credit transactions, and UPI facility, after February 29.

Following a substantial decline of over 50% since January 31, the company’s shares rebounded towards the end of last week. On February 21, Paytm’s shares opened 5% higher, once again reaching the upper circuit at INR 395.25 on the BSE.

Shareholder optimism received a boost from positive developments, including the RBI extending the business restrictions deadline to March 15 and Paytm’s announcement of relocating its nodal account to Axis Bank.  

In response, Paytm shares rose by 21.5% since Friday (February 16). 

Additionally, various brokerages lowered their ratings, price targets, and estimates for Paytm. Despite this, the mood shifted positively after the RBI issued FAQs on the matter and extended the deadline. 

Jefferies, however, suspended its rating and PT on Paytm amid the ongoing news flow, anticipating a 28% YoY decline in FY25 revenue and potential cash burns. 

Meanwhile, reports suggested that the Enforcement Directorate, investigating Paytm Payments Bank for possible foreign exchange violations, has not yet found any breaches.

Note: We at Inc42 take our ethics very seriously. More information about it can be found here.