Paytm shares continue to bleed; is there any ray of hope in sight?

Paytm share price: Shares of Paytm, the parent company of One97 Communications, are seeing more or less non-stop hammering. In Wednesday's trade (February 14, 2024), shares of the fintech company hit a 10 per cent lower circuit and marked their fresh all-time low of Rs 344.1.

Nevertheless, the stock recovered a tad later, and at around 10:11 am, Paytm shares were trading 9.6 per cent lower at Rs 343.6 apiece.

The stock’s steep decline of around 55 per cent comes in the aftermath of the RBI imposing restrictions on the company’s subsidiary, Paytm Payments Bank.

Furthermore, the RBI governor’s statement after the crisis in the stock, that the decision against the company offers no room for further review, added fuel to the fire. RBI Governor Shaktikanta Das said in his deliberation on the company that the apex banker acts on the regulatory entities after a comprehensive assessment.

In October last year, the stock hit its 52-week high price of Rs 998.3, and in a matter of over three months, the stock has toppled 65.5 per cent. 

From the issue price of Rs 2,150, the stock has tumbled by a significant 85 per cent.

Experts' take on Paytm shares

After the regulator’s thoughtful and stringent action against Paytm Payments Bank, wherein the RBI stated that the decision could not be reviewed, Zee Business Managing Editor Anil Singhvi mentioned that if he had shares of Paytm in his portfolio, he would not have continued to hold them after the RBI governor’s comments.

On the latest downgrade by global brokerage Macquarie for Paytm to an ‘underperform’ view with a target of Rs 275, Singhvi mentioned that brokerages are also understanding what RBI’s stance would mean for the payments services entity.

So, at best, the expert recommended avoiding the stock and suggested not engaging in bottom-fishing on the counter.

Macquarie downgraded the stock and noted that Paytm is fighting for survival. The downgrade by the brokerage is based on three major key points, as listed below:

• Post recent diktats, Paytm faces a serious risk of customer exodus, which significantly jeopardises its monetisation and business model;
• The brokerage has increased loss estimates by 170 per cent / 40 per cent over FY25E/26E, factoring in a 60–65 per cent decline in revenues due to lower payments and distribution revenues.
• The brokerage assumes a 50 per cent cash burn rate and a 20x P/E multiple to normalise earnings from its distribution business.