Macquarie downgrades Paytm, sees over 34% downside; stock hits 52-week low

Shares of One 97 Communications, the parent company of Paytm, lost over 8 per cent in morning deals on Tuesday (February 13) and hit a 52-week low of Rs 385.75 apiece on the BSE. The stock declined after global brokerage Macquarie downgraded Paytm and reduced its target price.

The brokerage downgraded the stock after Reserve Bank of India (RBI) Governor Shaktikanta Das ruled out any review of the central bank's action against Paytm Payments Bank Ltd (PPBL), saying that its decisions are well thought out.

At around 9:50 a.m., shares of Paytm traded 7.36 per cent or Rs 31.1, lower at Rs 391.5 apiece. The market capitalisation of the company at around the same time stood at Rs 24,866.02 crore.

Macquarie on Paytm

The brokerage downgraded Paytm to 'underperform' and sharply cut its target price to Rs 275 from Rs 650, which implies a 34.9 per cent downside from Monday's closing price, driven by a sharp reduction in revenues across various segments. 

On the rationale behind the downgrade, the brokerage said that due to recent incidents in the company, it may lose customers, which will have a significant effect on its monetisation and business model.

Another big issue that Macquarie noted is that moving payment bank customers to other bank accounts or moving related merchant accounts to other bank accounts will require KYC (know your customer) to be done again, indicating that migration within RBI's February 29 deadline will be a difficult task.

Additionally, according to the brokerage report "re-looking at their relationship with PayTM," AB Capital, one of PayTM's largest lending partners, has already pared down its buy now, pay later (BNPL) exposure to Paytm from a peak level of Rs 20 billion to Rs 6 billion currently and is expected to go down further. 

As per the report, the income of Paytm is expected to decline by 60 to 65 per cent from FY25 to FY26, and the deficit may increase by 170 per cent and 40 per cent from FY25 to FY26.

What is happening at Paytm? 

The Reserve Bank of India (RBI) has ordered Paytm Payments Bank Ltd. (PPBL), a restricted bank that can take deposits but cannot lend, to not take any further deposits, conduct credit transactions, or carry out top-ups on any customers' accounts, prepaid instruments, wallets, or cards for paying road tolls after February 29.

Paytm wallet customers can use the money until their balance is exhausted. They cannot add money after February 29. And in case the RBI does not relent, top-ups for the Paytm wallet will stop, and transactions through it can no longer be carried out.

READ MORE: Paytm shares hit the lower circuit again; Anil Singhvi suggests exiting the stock

Paytm share price: Past performance 

In a year, shares of Paytm have lost over 39 per cent underperforming the Nifty 50's rise of 22 per cent.

(With inputs from agencies)

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