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Another blow to Paytm! Macquarie cuts target price in latest downgrade; Shares fell 10%

paytm share price Today: Shares of Paytm witnessed a huge fall of up to 9.88% today on Bombay Stock Exchange (BSE) to hit a low of Rs 380.10. This decline comes after the global broking firm macquarie The company downgraded the Vijay Shekhar Sharma-led troubled fintech company to underperform from neutral call. Macquarie also cut Paytm’s target price to Rs 275, citing concerns about the company’s customer exodus risk, which poses a serious threat to its monetization and business model.
According to an ET report, Macquarie’s Suresh Ganapathy explained the reason behind the downgrade, saying that they have changed their methodology from price/sales to fair value on normalized distribution business profits. As a result, we have revised our target price to Rs 275. 650 rupees.
Ganapathy said that under his previous methodology, the valuation would have been Rs 225. Ganapathy highlighted the loss forecast to increase by 170%/40% in FY 2015/26, given the significant decline in revenues due to lower payment and distribution revenues. The brokerage also incorporated a 50% cash burn rate and 20x PE multiple for normalized income from the distribution business.
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The Macquarie report noted the challenges Paytm faced in transferring its payments bank customers and associated merchant accounts to other banks. This process will require Know Your Customer (KYC) verification to be conducted again, allowing migration within the Reserve Bank of India (reserve Bank of India) The February 29 deadline is a tough task.
The report also highlights that some lending partners are re-evaluating their relationship with Paytm, leading to increased lending risk if the partner reduces or ends its association with the fintech company. Business revenue could potentially decline.
Macquarie provided two scenarios for Paytm’s stock performance. In a bullish scenario, considering a 25% decline in distribution revenue, the stock could rise to Rs 540. However, in a bearish scenario, if distribution revenues fall by 75%, the stock could fall to Rs 180.
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Paytm has recently faced regulatory issues, including a ban imposed Paytm Payments Bank, which has Paytm wallet. Reserve Bank of India (RBI) Governor Shaktikanta Das has said that there is little scope for review of the action taken against Paytm. “When constructive engagement does not work or when the regulated entity does not take effective action, we move to impose trade sanctions. Our action is commensurate with the gravity of the situation,” Das said.
The value of Paytm shares has fallen by almost 50% since the RBI ban on January 31. Market experts have cautioned retail investors to avoid buying Paytm shares until the company resolves its regulatory issues.
On the contrary, global broking firm Bernstein has suggested a buy strategy on dips and set a target price of Rs 600.

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