Paytm Faces Share Price Decline Amid Strategy Shift

Paytm Faces Share Price Decline Amid Strategy Shift

VoM News Desk | December 12, 2023 | 06:05 PM IST | Breaking News | Follow on Google News

Paytm Faces Share Price Decline Amid Strategy Shift Image/Mint

Paytm Faces Share Price Decline Amid Strategy Shift

Paytm’s share price experienced a decline of up to 6.25% during intraday trades on the BSE, reflecting weakened investor sentiment that’s resulted in a more than 37% correction in stock prices from its October highs.

The company’s recent move to reduce small-ticket loans in response to regulatory changes significantly impacted investor confidence, leading to brokerage downgrades. This strategic shift away from small-ticket Buy Now, Pay Later (BNPL) loans is expected to heavily affect Paytm’s overall loan originations, given that this segment represents over 50% of total disbursements.

While Paytm has announced a plan to expand its credit distribution business by focusing on higher-ticket loans for consumers and merchants in collaboration with banks and NBFCs, analysts remain concerned about the shift away from small-ticket BNPL loans.

JM Financial analysts highlighted that the newer high-ticket loans would be directed to well-tested, prime segment customers, potentially impacting near-term growth in lending business and financial services revenues.

Shivaji Thapliyal, Head of Research and Lead Analyst at Yes Securities, mentioned that Paytm revised its growth guidance for personal loans to 15-20%, significantly lower than the earlier guidance, while merchant loans are also expected to grow at 30-45%, down from previous estimates.

Additionally, the disbursement run rate for postpaid loans is expected to halve, marking a substantial downward revision.

Analysts at Motilal Oswal Financial Services remain watchful about the long-term effects of these measures and the outlook for low-ticket unsecured loans.

They’ve adjusted their FY24 and FY25 disbursement estimates, resulting in an 11-16% cut in their adjusted EBITDA over that period.

Despite these concerns leading to earnings cuts, brokerages still suggest an upside potential for the stock. JM Financial’s target price stands at ₹1120, while Motilal Oswal’s target is at ₹1025, signaling a potential for the stock to rise.

However, the overall sentiment remains cautious until the company’s new strategy stabilizes and its impact on growth trends becomes evident.

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VoM News Desk

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