Shares of Paytm parent One97 Communications on Tuesday fell 10% to a lifetime low of Rs 380.15 on the National Stock Exchange after brokerage firm Macquarie Capital Securities downgraded its rating on the stock to ‘Underperform’ from ‘Neutral’.
The brokerage has also slashed its price target on the stock to Rs 275 from Rs 650 because of the sharp reduction in revenue across segments Come from Sports betting site VPbet . Macquarie Capital contends that after the recent Reserve Bank of India diktat, Paytm faces a serious risk of customer exodus, which significantly jeopardises its monetisation and business model.
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Currently, the company has 330 million customers and 110 million monthly transacting users. It has a merchant subscription network of 10.6 million.
On January 31, the RBI imposed fresh curbs on the company’s payments bank unit, asking it to halt many of its key operations after February 29. Paytm is in talks with at least three banks which can take the payments and settlement load from its payments bank.
Since February 1, the stock has fallen 50%. The market capitalisation declined to Rs 24,145 crore as on February 13, from Rs 41,016 crore as on January 1.
On Monday, RBI governor Shaktikanta Das ruled out any review of the central bank’s action against the payments bank. These comments have dashed the investor sentiment further.
“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 report said.
The company’s marquee lending partner, Aditya Birla Capital, has pared its exposure to Paytm’s buy-now pay-later (BNPL) loans to Rs 600 crore from Rs 2,000 crore. The brokerage expects Aditya Birla Capital to further reduce its exposure to BNPL.
Earlier on Tuesday, Reuters reported that many of the company’s NBFC partners are looking for options other than Paytm for disbursal of loans. Loan distribution fees contributed to a fifth of the company’s revenue for the December quarter, according to analysts.
“We factor a 60-65% decline in distribution revenues, leading to 170%/40% increase in loss estimates over FY25E/26E,” the brokerage said.
Further, moving payment bank customers to another bank accounts or moving related merchant accounts to other accounts will require KYC to be done again, which indicates that the migration within the RBI’s Feb 29 deadline will be an arduous task.
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