One of India’s highest-valued startups continues to have a horror run at the stock markets.
Paytm’s stock has crashed to a record low of 1155 per share after Macquarie lowered its target price for the stock to Rs 900 per share from Rs 1,200 per share. Patym had opened the day trading at Rs. 1228, but fell more than 6 percent through the day, hitting a low of Rs. 1152 . Paytm’s share ended the day trading at Rs. 1159, which means that the stock has lost over 46 percent of its value since its IPO less than two months ago.
The immediate trigger which led to the fall in Paytm’s shares seemed to be a new report by analyst firm Macquarie, which cut its price target for Paytm’s shares from Rs. 1200 to Rs. 900. When Paytm had first gone public at a price of Rs. 2150 per share, Macquarie had stuck its neck out and said that Paytm’s shares were worth only around Rs. 1200. With the company’s shares plummeting to those levels in less than two months, the new report by Macquarie — which now says Paytm’s shares are worth only Rs. 900 — seemed to precipitate another selloff.
In the report, Macquarie revised its revenue CAGR estimate for Paytm from 26 to 23 percent for FY21-26E , citing lower distribution and commerce/Cloud revenue. The report also raised loss projections for the company by 16 to 27 percent for FY22-25 on lower revenue and higher employee as well as software costs. “We are roughly cutting revenue estimates for FY21-26E on an average by 10 percent every year due to lower distribution and commerce/Cloud revenues offset partially by higher payment revenues,” it said.
The report highlighted how regulatory challenges could affect Paytm in the coming years. RBI’s proposed digital payments regulations could cap wallet charges, which would adversely affect the company, which makes 70% of its overall gross revenue from its payments business. Macquarie also highlighted that Paytm’s foray into insurance was recently rejected by insurance regulator IRDA, and this could impact its prospects of getting a full banking license. The report mentioned that senior employee attrition could also negatively affect Paytm’s business prospects.
And the report also presented a bleak view of Paytm’s lending business, which was supposed to make the company money in the long run. The report said that Paytm’s average ticket size for loans disbursed has been coming down consistently in the past 12 months, and currently stood at sub-Rs 5,000 levels. “At this size, we don’t think it is doing many merchant loans and most of the loans are small value BNPL (buy-now-pay-later) loans. Hence the eventual distribution fees realised by them are likely to be much lower than our earlier estimates,” Macquarie said.
These are all grim numbers, and perhaps contribute to Paytm being currently valued at just $11 billion, down from the $21 billion valuation it had commanded at its IPO. The crash in the stock also means that investors have now lost a staggering Rs. 70,000 crore in Paytm shares in the last two months. And with analyst firms saying that Paytm’s stock could fall another 25 percent from current levels, the pain for Paytm investors might just be getting started.