The bad news doesn’t seem to be stopping anytime soon for Paytm.
Paytm’s stock has hit a record new low of Rs. 385 per share after analyst firm Macquarie said the fair value of its share was just Rs. 275 per share. Macquarie downgraded Paytm to “underperform”, and said it was “fighting for survival”. Over the last couple of years, Macquaire has consistently said that Paytm’s shares were overvalued, and they’d eventually always fallen to the levels indicated in its reports.
“We downgrade PayTM to underperform and sharply cut target price to Rs. 275 from Rs. 650 driven by a sharp reduction in revenues across various segments,” Macquarie said in its note. “Post the recent regulatory changes and diktats, Paytm now faces a serious risk of exodus of customers (overall 330mn customers and 110mn MTUs – monthly transacting users and merchant subscription network of 10.6mn) which significantly jeopardises its monetisation as well as its business model,” it added.
“We cut revenues sharply as we reduce both payments and distribution business revenues (60-65% over FY25/26E). Moving payment bank customers to another bank accounts or moving related merchant accounts to other bank accounts will require KYC (Know your customer) to be done again based on our channel checks with partners, indicating that migration within RBI’s Feb 29th deadline will be an arduous task,” Macquarie said.
Paytm’s stock appeared to react to the note, and fell 8 percent in early morning trade to touch Rs. 385 per share. There had also been overnight commentary that had been unfavourable to Paytm — RBI governor Shaktikanta Das had said that there would be no review of the action taken against Paytm Payments Bank. “Let me be very clear that there is no review of the action taken against Paytm Payments Bank…when a decision is taken, it is taken after much consideration and deliberation. Decisions are not taken in a casual manner. They are taken in a serious manner,” Das further added.
Macquarie has now valued Paytm at just Rs. 275 per share, and its stock has fallen another 8 percent in trade today. In the past, Macquarie had been uncannily accurate with its predictions on Paytm’s stock. When Paytm had gone public at a price of Rs. 2150, Macquarie had stuck its neck out and said that the stock was worth only Rs. 1200. Paytm’s share had crashed nearly 40% in its first two days of trade, and after staging a brief recovery, had touched the levels of Rs. 1,200 that Macquarie had predicted. At that point, Macquarie had come out with another report, this time cutting its price target to Rs. 900. Paytm’s share dutifully followed the report, falling to a low of Rs. 881. Paytm had then cut Paytm’s share price target to Rs. 700, and Paytm had again fallen in the weeks that followed. In March 2022, Macquaire had cut Paytm’s price target to Rs. 450 per share, and Paytm had touched those levels in the months that followed. It remains to be seen if Macquarie’s latest price target of Rs. 275 is also hit, but if the analyst firm is correct, there could be even more pain in the offing for Paytm’s investors.