Paytm Shares Hit An All-Time Low At INR 1,152 After Macquarie Targets INR 900

The share price of Paytm saw a steep decline on January 10, hitting an all-time low of INR 1,152, a 45.14% decline from the issue price. Its share’s closing price was INR 1,159. Apart from today’s slide of 6%, Paytm’s share price has continuously been falling for the past three weeks.

The decline came a day after brokerage firm Macquarie retained its ‘underperform’ rating on the stock. Macquarie slashed its price target for Paytm by 25% to INR 900 from INR 1,200.

Since its listing on November 18, the share price of Paytm has been through a roller coaster ride touching an all-time high of INR 1,961.05 and a low of INR 1,271.25 per share (before today’s low). In fact, even when it hit a record high of INR 1,961.05 on November 18, it failed to touch its issue price post listing.

The market sentiment for Paytm has, in general, been weak. Previously, Morgan Stanley started the coverage of Paytm with a target price of INR 1,875. The reasons for a weak target included low cross-sell cost, smaller share in financial services and commerce, and inability to scale up partnerships in financial services.

Some of the risk factors outlined by Macquarie included slow growth of revenue until 2025-26, RBI imposing charges on digital payments that would cut Paytm’s revenue, rejection of Paytm’s application for insurance broking, and many senior executives resigning from Paytm.

“Post the various business updates and results, we believe our revenue projections, particularly on the distribution side, are at risk,” Macquarie said in a note.

More importantly, the brokerage firm is concerned about Paytm’s lending operations. During the IPO, Paytm had touted the lending operations as an important growth driver before the initial public offering. Macquarie noted that Paytm’s average loan ticket size has been declining and stands at below INR 5,000.

“At this size, we don’t think it is doing many merchant loans and most of the loans are small value BNPL (buy now pay later) loans. Hence, the eventual distribution fees realised by them are likely to be much lower than our earlier estimates,” Macquarie said in a note.

Between today and its disastrous listing on November 18 at a discount of nearly 10%, the value of Paytm’s share declined by 13.22% intraday (on December 15), the day when the lock-in period for anchor investors ended.

Paytm was the largest public issue in India, raising INR 18,300 Cr — a fresh issue of INR 8,300 Cr and an OFS of INR 10,000 Cr. The net proceeds from fresh issuance will be utilised for strengthening the Paytm ecosystem and investing in new business initiatives, acquisitions and strategic partnerships.

Despite business growth and rise in revenues, continued losses and lag in profitability have been concerns for the NCR-based digital payments giant.

During Q1 FY22, its net loss increased 34% to INR 381.9 Cr, from INR 284.4 Cr during the corresponding quarter of FY21.

The increase in losses comes largely on the back of a 40.6% year-on-year (YoY) surge in its expenses to INR 1,312.3 Cr in April-June this fiscal.

In terms of revenue, it witnessed a 62% growth from operations during Q1 FY22 at INR 890.8 Cr, backed by robust growth from payment and financial services.