Paytm Shares Touch 52-Week Low After Macquarie Cuts Target Price To INR 275

Shares of fintech giant Paytm nosedived 10% to hit an all-time low at INR 380.35 during Tuesday’s (February 13) trading session on the BSE.

This comes after brokerage Macquarie downgraded One97 Communications to ‘underperform’ from an earlier ‘neutral’ rating and lowered its price target (PT) to INR 275 from INR 650. The brokerage’s current target implies a downside of 27.7% to the stock’s last close.

Macquarie analyst Suresh Ganapathy said in a research note that the downgrade and the PT cut were driven by a sharp reduction in the company’s revenues across various segments.

Due to recent regulatory changes and mandates, Paytm is at the risk of losing a large number of customers, including its monthly transacting users and merchant subscription network, Ganapathy said. This threatens its ability to generate revenue and sustain its business model.

“Our channel checks with some lending partners reveal that they are re-looking at their relationship with Paytm which eventually could lead to a decline in lending business revenues in case partners scale down or terminate their relationship with Paytm,” the analyst added.

The crisis started for the fintech major after the RBI on January 31 barred Paytm Payments Bank from taking deposits, credits, or processing top-up transactions in its customer accounts for ‘persistent non-compliances’. The bank has also been barred from processing other banking services like UPI facilities and funds transfer from February 29, 2024.

Meanwhile, the central bank’s governor Shaktikanta Das on Monday said there is “hardly any room” to review the action on the payments bank.

“The decisions taken by the Reserve Bank are after due thought process…be it a bank, payment bank or cooperative bank. If we are taking action against somebody, not specifically talking about Paytm, but in general, we interact for months and years…There is hardly any room for review,” he said.

Das said the central bank provided Paytm Payments Bank one-month’s time so that customers are not inconvenienced.

Amid the ongoing regulatory uncertainties, Macquarie also increased loss estimates on Paytm by 170% and 40% over FY25 and FY26, respectively, factoring in a 60-65% decline in revenue due to lower payments and the company’s distribution revenue.

After a significant slump in 2022, shares of Paytm rallied in 2023, rising 80% till October to cross INR 980 level. However, amid a rejig in its lending business, the shares ended 2023 at INR 630 level.

Currently, Paytm shares are trading 40% lower year to date.

Note: The story has been edited to add more details.

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