Paytm Shares Hit All-Time Low; Market Cap Below 2016 Valuation

SUMMARY

Shares of Paytm hit their all-time low of INR 476.65 on the BSE

The lock-in period for Paytm’s pre-IPO shareholders expired last week, after which one of its major investors SoftBank sold 4.5% of its stake in the company

In a report, brokerage Macquarie said that Jio Financial Services could pose a risk to fintech business models, including Paytm

Shares of fintech giant Paytm hit their record low of INR 476.65 on the BSE during the intraday trading on Tuesday (November 22) after plunging as much as 11%.

The lock-in period for Paytm’s pre-IPO shareholders also expired last week, after which one of its major investors SoftBank sold 4.5% of its stake in the company worth about $200 Mn in a bulk deal.

By 10 am IST, Paytm shares were also trading with extremely high volumes of over 44K. Besides, Paytm’s current market cap of around $3.8 Bn is now below its 2016 valuation of $4.8 Bn.

Though a major sell-off at Paytm was expected after its lock-in expiry, several brokerages recently reiterated their bullish stance on the Vijay Shekhar Sharma-led firm.

After Paytm reported its Q2 FY23 results with a widened year-on-year loss of INR 571 Cr earlier this month, at least four brokerages, including BofA Global Research, Citigroup, and J.P. Morgan, raised their price targets (PTs) on Paytm.

In fact, with a ‘buy’ rating and PT of INR 1,000, Goldman Sachs said, “We see the current share price as offering a compelling entry point into India’s largest and amongst the fastest-growing fintech platforms.”

Paytm shares were trading at INR 482.95 at 1.30 PM IST on the BSE, over 75% below their debut price of INR 1,950.

Meanwhile, as per a report, brokerage Macquarie has said that Paytm could face risks from Jio Financial Services.

“Jio Financial Services will have a large balance sheet, not be asset-light and eventually manufacture most product offerings, giving it a significant competitive advantage… It can be a real threat to fintech business models as well as NBFCs. Jio Financial not only can offer attractive rates in merchant lending and digital unsecured lending mark,” the brokerage noted.

Last month, Reliance Industries Ltd (RIL) said it would demerge its financial services undertaking into Reliance Strategic Investments Ltd (RSIL) and RSIL would be renamed as Jio Financial Services Ltd (JSIL). RSIL is a wholly-owned subsidiary of RIL and is a RBI-registered non-deposit taking systemically important (ND-SI) non-banking financial company.

It must also be noted that the National Payments Corporation of India (NPCI) is in discussions with the Reserve Bank of India (RBI) about implementing a 30% market cap limit for UPI payment services run by third parties.

Paytm held 11% share in the UPI market in October. If NPCI goes ahead with the implementation of the rules, it might provide an opportunity to Paytm to gain some share from market leaders PhonePe and Google Pay.