Following RBI curbs, Paytm shares fall 20% for second day
Paytm's shares hit lower circuit for the second consecutive session today, dropping 20% to Rs. 487.20. The two-day losses have wiped out $2 billion from its market value. This comes after the RBI imposed restrictions on its lending business, the Paytm Payments Bank Limited (PPBL). The RBI's directive prevents PPBL from accepting new deposits and conducting credit transactions after February 29. Jefferies has downgraded Paytm to 'underperform' from 'buy,' cutting target price from Rs. 1,050 to Rs. 500 per share.
Macquarie also reduced its target price for Paytm
Apart from Jefferies, Macquarie also reduced its target price for Paytm to Rs. 650 per share, maintaining a 'neutral' stance. They stated that they don't see any immediate solution to Paytm's problems, as the lapses found by the RBI are significant. In response to the RBI directive, Paytm temporarily halted its lending platform operations and began discussions with third-party banks for potential partnerships. Bhavesh Gupta, COO of Paytm, stated that RBI's questions are obvious and Paytm is regularly answering them.
Paytm's annual EBITDA could fall by Rs. 300-500 crore
Paytm estimates that the worst-case impact on its annual EBITDA could be between Rs. 300-500 crore. Meanwhile, fund managers and analysts predict a 5-15% impact on earnings per share (EPS), raising concerns as the company works toward profitability. As Paytm navigates these challenges, it is crucial for investors and stakeholders to stay informed about the company's progress and the potential implications of the RBI's directive.
Is the worst yet to come for Paytm?
Yesterday, NDTV Profit reported that RBI's curbs against Paytm Payments Bank could possibly amount to its license being revoked in near future. RBI is waiting to ascertain the impact of such a license cancelation on the market and other stakeholders. The bank is working to find a middle ground and address compliance requirements with the RBI. In the meantime, the bank's parent company, One97 Communications Ltd., has already begun exploring options to designate a different bank to handle payment services.
