Paytm crashes 20%
Paytm’s decision to scale down its low-ticket postpaid lending business comes after the RBI tightened the norms for unsecured consumer lending.
Jefferies slashed its price target for Paytm while Goldman Sachs downgraded the stock.
Shares of Paytm nosedived 20 percent in opening trade on December 7 after the company announced plans to slow down its small-ticket postpaid loans while it looks to expand its high-ticket personal loans and merchant loans. The decision has not gone well with brokerages as well, prompting them to cut their revenue estimates for the company.
At 09.23 am, shares of Paytm were locked in the 20 percent lower circuit at Rs 650.45.
The company said at its analyst meet that its postpaid loans could fall to half, but it would not have any impact on margins or revenue. Postpaid had the lowest take rate and hence revenue impact will be minimal, the company added.
Brokerage firm Jefferies stated that Paytm’s decision to recalibrate its ‘Buy now pay later’ (BNPL) business came as lending partners dialed back after RBI’s recent move on unsecured lending. BNPL disbursals, which make up 55 percent of total disbursements will halve in the next 3-4 months, Jefferies stated in a note. Even though the management plans to partially offset it by scaling up its high-ticket personal loans and merchant loans, Jefferies feels that the quantum of tightening for the BNPL business is ahead of expectations.
On that account, the brokerage slashed its FY24-26 revenue estimates for Paytm by 3-10 percent, also triggering a cut in adjusted EBITDA estimates by 12-15 percent. Not just that, Jefferies also revised its price target for the stock downward by over 19 percent to Rs 1,050 even as it retained its ‘buy’ call on Paytm.
Goldman Sachs also downgraded the stock to a ‘neutral’ rating with a price target of Rs 840. The brokerage house also lowered its FY24-26 revenue and adjusted EBITDA estimates for Paytm by up to 10 percent and 40 percent, respectively.
On the other hand, Morgan Stanley believes that the decision to scale its down low-ticket postpaid lending business will result in a drop in Paytm’s disbursement run-rate over the near term. The brokerage has an ‘equalweight’ call on the stock with a price target of Rs 830.
Motilal Oswal Financial Services also believes that Paytm’s total disbursement run rate is also likely to decline to around Rs 4,500 crore per month from of about Rs 6,000 per month. “Paytm adds average 3.5-4 lakh customers every quarter, which is also expected to come down by 50 percent,” MOFSL added.
Meanwhile, even though MOFSL said that it remains watchful of the longevity of these measures and the outlook in low-ticket unsecured loans the firm still trimmed its FY24/FY25 disbursement estimates by 15 percent-
18 percent, resulting in an 11-16 percent cut in its adjusted EBITDA forecasts for FY24/25.
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