The shares of the Mutual Funds industry in the crisis-ridden Paytm has increased in January from the last month, showing confidence towards the fintech company.
The crisis for Paytm continues to worsen as the One97 Communications reached yet another all-time low of Rs 386.25 in Tuesday’s trading session, marking an 8.60 per cent decrease.
This is the first instance since its listing that the stock has fallen below the Rs 400 threshold.
In a recent report, global brokerage firm Macquarie downgraded stock’s rating to ‘Underperform’ and significantly lowered its target price to Rs 275 per share from an earlier target price of Rs 650, citing the company’s sharp reduction in revenues across various segments.
This revised target price indicates a 35 per cent downside potential from the current trading price of Rs 396 per share.
“Post the recent regulatory changes and diktats, Paytm now faces a serious risk of the exodus of customers (overall 330 million customers and 110 million MTUs—monthly transacting users and merchant subscription network of 10.6 million), which significantly jeopardises its monetisation as well as its business model,” Macquarie said.
“Moving payment bank customers to another bank account or moving related merchant accounts to another bank account will require KYC (know your customer) to be done again based on our channel checks with partners, indicating that migration within RBI’s February 29th deadline will be an arduous task,” the brokerage added.
As a result of these concerns, Macquarie has sharply reduced revenue projections, particularly in the payments and distribution segments, forecasting a decline of 60-65 per cent over the fiscal years 2025 and 2026.
According to the brokerage channel checks, some lending partners are already looking at their relationship with Paytm, which the brokerage believes could lead to a decline in lending business revenues if partners scale down or terminate their relationship with Paytm.
It is worth highlighting that the company’s major lending partner, AB Capital, has reduced its exposure to Paytm’s Buy Now, Pay Later (BNPL) services significantly. Initially at a peak level of Rs 20 billion, AB Capital has now lowered its exposure to Rs 6 billion.
After the RBI’s ban on Paytm Payments Bank, company’s stock experienced a sharp decline of 20 per cent in the following two trading days.