Here's why Paytm shares tanked 20% today
Shares of Paytm's parent company, One 97 Communications, took a 20% hit, falling to Rs. 650.45 on the NSE after the company revealed plans to issue fewer personal loans under Rs. 50,000. This move comes as the Reserve Bank of India (RBI) tightens consumer lending regulations due to increased demand for small-ticket loans and an increase in overdue payments. Paytm now plans to focus on offering higher-value personal and commercial loans to low-risk, creditworthy customers.
Paytm's shift in strategy following RBI regulations
Paytm's President and COO, Bhavesh Gupta, explained that the company is becoming "ultra-conservative" in this segment, a Reuters report said. He stated, "On the back of recent macro development and regulatory guidance, in consultation with our lending partners, we have decided to reduce less than Rs. 50,000 loan distribution." Gupta anticipates a 40%-50% decrease in loan volume through Paytm's post-paid product but expects minimal impact on revenue growth.
Analysts predict impact on Paytm's loan distribution and revenue
During the July-September quarter, Paytm's postpaid loans made up roughly 56% of total loans. Financial analyst Rahul Jain at Dolat Capital estimates that loans under Rs. 50,000 account for about 38% of Paytm's total loans. He predicts a 15% quarter-on-quarter negative impact on the total value of loans distributed by Paytm but foresees a much lower revenue impact of around 5% QoQ. At the time of writing, Paytm traded 17.74% down at Rs. 668.80 apiece on the NSE.
