Brokerage firm Macquarie has come out with a report on Paytm, giving it an underperform rating and setting the target cost for the fintech organization’s shares at Rs 900. The revised target price of Rs 900 is a further 25 percent slide to its earlier target price.
The stock was down 4 percent at Rs 1,182.50. Earlier, the brokerage firm had set the stock’s target price at Rs 1,200. Since then, the company’s share price has fallen 40 percent as the market has punished it for a thinly spread out business model, scant revenues and an unclear path to profitability.
Over the years, Paytm has looked to diversify beyond payments into fields like mutual fund and stock trading platform Paytm Money. However, recently its insurance foray had reportedly been rejected by the Insurance Regulatory and Development Authority. Paytm’s links with Chinese investors might have been a reason behind it. Macquarie analysts Suresh Ganapathy and Param Subramanian feel this rejection could impact Paytm’s prospects of getting a bank license.
They also pointed out that Paytm’s average ticket size for loans disbursed by it had been consistently falling and now stood below the Rs 5,000 level. They feel most of the loans are small value BNPL (buy now pay later) loans and it may not be doing a lot of merchant loans.
“Competition will limit commerce revenue growth and distribution business will continue to be led by small ticket BNPL loans thereby limiting revenue potential,” said Ganapathy and Subramanian.
They further added, “Senior executives have been resigning from Paytm, which is a cause of concern and could impact business in our view if the current rate of attrition continues.”
The broking firm has reduced Paytm’s earnings per share estimates for the financial year 2022 to the financial year 2025 by 16-27 percent, driven by expected lower revenue and higher expenses.
