Macquarie sees up to 25% erosion in Paytm share price from current levels; views RBI's discussion paper on digital payments, as setback for company

One-97 Communications-backed Paytm share price is likely to see reduction of around 25 per cent to Rs 1200 per share from current market price, according to estimates by Macquarie. The global brokerage firm cites Reserve Bank of India's (RBI) discussion paper on digital payments charges as a primary reason for the likely price erosion. 

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“It’s a big a risk for fintech companies, where charges on PPI and wallets are likely to reduce, and any caps on payment take-rates will negatively impact company’s weak payment margin,” Macquarie stated.  

RBI Governor Shaktikanta Das on Wednesday announced its intention to release a discussion paper on digital payment soon.  Das said this during the MPC announcements.

This is yet another instance when Macquarie has taken a view on Paytm’s share price. On the first instance it had estimated Paytm shares to list at a 40 per cent discount citing a "weak business model". Noteably, the share was listed at Rs 1950 per share on November 18 - a discount of 9 per cent from the issue price of Rs 2150.

It recovered later after two days of decline. 

TradeSwift Director Sandeep Jain said that the fintech sector was overhyped and the industry was going through a lot of changes and a strict competition could be expected as the central bank also proposed about the digital banks during Wednesday’s policy meet decision. 

The competition among peers is obvious in this space, however, the private banks such as HDFC Bank, ICICI Bank and state-run SBI have been going big on digital front and were making significant dents in the digital space, Jain said. He said that the stock was overvalued. 

Notwithstanding the support being shown by big investors, a non-profitable business model does not inspire confidence, Jain further said. He also raised his doubts on the sustainability of such model in the absence of profits. He expressed his concerns on the overall fintech sector. 

The shares of Paytm closed at Rs 1595 per share on the BSE on Thursday, up 2.5 per cent from the previous closing price. 

Besides Paytm, the other listed company that could be impacted through RBI’s decision is Fino Payments Bank, whose anchor investors 30-day lock-in period end today and witnessed a weak trading session across day.