Paytm shares crash as Macquarie downgrades price to Rs. 275
Paytm shares crashed over 9% today after Macquarie, a global financial services firm, lowered its target price for the fintech giant to Rs. 275. Macquarie also warned of a customer exodus as troubles for Paytm continue to mount. Since RBI's curbs imposed on January 31 due to non-compliance issues, Paytm's stock prices have reduced by half. At the time of writing, Paytm stock was trading at Rs 382.05, which is 9.5% lower than yesterday.
Paytm's target price trimmed to Rs. 275 from Rs. 650
While changing its methodology on normalized distribution business profits from price/sales to fair value, Macquarie revised target price for Paytm to Rs. 275 from Rs. 650. It raised loss estimates by 170% for FY25-FY26 by accounting for 65% decline in revenue because of reduced payments and distribution revenues. Additionally, it expects 50% cash burn rate and a 20x price to earning multiple (PE) from its distribution business. PE shows how much investors are willing to pay per dollar of earnings.
Updating KYC by February 29 deadline 'arduous task' for Paytm
Paytm is scrambling to partner with other banks so as to migrate its accounts. However, this will require the Know Your Customer (KYC) process to be done afresh. While announcing curbs on Paytm Payments Bank, the RBI had asked it to update all Know Your Customer (KYC) details by February 29. However, Macquarie opines that meeting the February 29 deadline would be an arduous task for Paytm due to which it has slashed the revenue projections.
