Monday, March 4, 2024

Paytm shares fell 20% due to RBI action, brokerage reduced rating, gave lowest target till date

-3 Advertisement -

Paytm Stock Crash Today: Paytm shares have fallen drastically by 20 percent today. The Reserve Bank of India (RBI) had directed Paytm Payments Bank Limited not to accept deposits or top-ups in any customer account, prepaid instrument, wallet and Fastag after February 29, 2024. After this, the company’s shares fell. The shares fell by 20 percent to Rs 608.80 on BSE. Whereas on NSE it fell by 19.99 percent to Rs 609. Whereas on Wednesday it closed at Rs 609. The market cap (Mcap) of the company also declined by Rs 9,646.31 crore to Rs 38,663.69 crore in early trade.

Brokerage House Motilal Oswal: Neutral

Brokerage house Motilal Oswal has downgraded its rating on Paytm to Neutral and has given a target price of Rs 575. RBI has announced punitive measures, which will have a significant impact on the business performance of Paytm. While the regulator had earlier banned PPBL from adding new customers, the latest action bars the company from doing any credit or deposit transactions after February 29, 2024. Apart from payments, the restrictions will also affect the company’s financial business, as the company cross-sells its financial products to customers transacting on the platform.

Paytm recently announced plans to shrink its BNPL operations and is working to mitigate the impact by increasing higher-ticket individual and merchant loans. In this backdrop, the latest measures raise serious concerns over its business outlook and damage overall investor confidence. The company has cited a worst-case annual EBITDA impact of Rs 3-5 billion from the RBI measures.

Brokerage house Jefferies: underperform

Brokerage house Jefferies has reduced its rating on Paytm from ‘buy’ to ‘underperform’ and reduced the target price to an all-time low of Rs 500. Jefferies has reduced the rating on the stock after RBI imposed big ban on the loan business of the company. Anticipating a huge reputational risk for Paytm after the RBI action, Jefferies has cut the target significantly from the current price. Jefferies believes the RBI ban on Paytm Payments Bank reflects concerns over persistent non-compliance. In March last year, RBI had also stopped Paytm Payments Bank from adding new customers.

Jefferies has also estimated that the direct impact of RBI’s action on Paytm’s wallet and payments business will be around 20-30 percent of its EBITDA. The brokerage also feels that the reputation impact on lending partnerships could impact Paytm’s EBITDA by 20-25 per cent.

What is the order of RBI?

RBI had said in its order that the ‘nodal accounts’ of One97 Communications Limited and Paytm Payments Services, the company operating Paytm, should be closed as soon as possible before February 29. One97 Communications holds a 49 per cent stake in Paytm Payments Bank Ltd but classifies it as an associate, not a subsidiary. The RBI order is expected to impact the company’s annual operating profit by Rs 300-500 crore.

(Disclaimer: The advice to invest in stocks has been given by the brokerage house. These are not the personal views of Financial Express. There are risks in the market, so take expert opinion before investing.)

-4 Advertisement -
- Advertisement -

Latest article