Paytm Shares Nosedive 20% After It Scales Down Postpaid Loan Biz

Shares of One97 Communications Ltd, the parent entity of fintech major Paytm, were locked in the 20% lower circuit at INR 650.65 on Thursday (December 7) following the company’s plan of scaling down its focus on small-ticket loans of less than INR 50K, which predominantly comprise its postpaid loan business.

After opening over 8% lower at INR 744.95 apiece on the BSE, the stock hit 20% lower circuit at INR 650.65.

Paytm shares ended Wednesday’s (December 6) trading session at INR 813.3 on the BSE.

“While we’ll continue to do postpaid, and it may not be the same growth level that we were doing earlier, it will be significantly lower than what we were doing earlier, but it will be a product that will continue,” the fintech major said at an investors call on Wednesday.

Paytm said it will further expand its business to offer high-ticket personal and merchant loans, which would be targeted at “lower-risk and high credit worthy customers”.

Earlier reports surfaced that Paytm temporarily halted its postpaid loan operations as its non-banking financial company (NBFC) partners have become cautious following the Reserve Bank of India’s recent tightening of norms around unsecured lending. One of Paytm’s major lending partners, Aditya Birla Capital, has pulled out of the postpaid partnership.

Although Paytm rejected this report and said Aditya Birla Capital continues to be a partner, the postpaid loan section on the Paytm app currently shows a message saying it is under maintenance.

Paytm said that the postpaid loan product will not be discontinued, but it will be available only to some users.

The fintech major has significantly increased its focus on loan distribution in recent years, resulting in strong growth.

In Q2 FY24, Paytm saw its disbursals increase to 1.32 Cr loans worth INR 16,211 Cr, a jump of 44% and 122% year-on-year (YoY), respectively. The postpaid loans vertical has consistently been the highest contributor to its lending business in terms of value.

BofA, in a recent research note, said that Paytm’s business is likely to be impacted following the RBI’s move to tighten norms for lenders disbursing unsecured loans. The study also noted that as per the fintech giant’s Q2 financials, 56% of its loan value came from the buy now pay later (BNPL) segment, 20% from merchant loans and 24% from personal loans.