Shares in Paytm fell to ₹1,165 ($15.71), the lowest since its market debut in November, following the country’s largest initial offering after a major brokerage further reduced the price of payments shares.
The stock, which opened on Monday at 1,226 yen, was down 5.3% at 1:55 pm Indian standard time. Paytm, which has struggled to improve its share price since its debut, is down 45% from its issue price of 2,150 yen ($28.9). The company’s market value, at the time of publication, was $10.2 billion, nearly half of what it had sought during its debut and below the $16 billion valuation in which it raised a funding round in late 2019 .
The price drop follows a report by brokerage Macquarie on Monday, in which it maintained its lowest rating on One97 Communications, Paytm’s parent company, and lowered its target price to ₹900 ($12.14), down from ₹ 1,200 you had assigned before. debuts on the market on November 18th.
Macquarie was the only broker who had such a bleak view of Paytm’s prospects at the time of its market debut. Bernstein analysts, by contrast, have estimated Paytm’s valuation to be between $21 billion and $24 billion. (A Bernstein spokesperson did not respond to a request for comment in November.)
“By publishing the various updates and business results, we believe our revenue projections, particularly on the distribution side, are at risk and therefore we have reduced our revenue CAGR from 26% to 23% for FY21-26E. We are cutting revenue estimates for FY21-26E by an average of 10% each year due to lower distribution and commerce/cloud revenue partially offset by higher payment revenue,” Macquarie analysts wrote on Monday.
“We reduced our earnings (increased our loss projections) by 16-27% for the EF22-25E due to lower revenues and higher staff and software expenses. We have drastically reduced our TP by ~25% due to lower target multiple of 11.5x (price/sales ratio) (from 13.5x previously) and lower sales numbers. Keep UP with a revised TP of Rs900.”
The broker said that RBI’s proposed digital payments regulations could limit wallet charges, which would hurt Paytm’s business, where the payments side still represents 70% of the company’s overall gross revenue. Macquarie also cited the departure of senior Paytm executives and the reduction in ticket size for loans disbursed by Paytm as other factors that could affect the company’s future prospects.
In a report in the second half of December, Morgan Stanley analysts labeled Paytm shares “overweight” and assigned a target price of ₹1,875 ($25.2), saying the company was “well positioned to capitalize on the next acceleration in digital financial services/commerce delivery in India.”
“The huge TAM, India’s distinctive technology architecture and regulatory support partnership approach are key enablers, we believe. India has little penetration in financial services and across all segments we expect strong growth. More importantly, penetration of digital distribution of third-party financial services is significantly low and we will see a strong acceleration in the next five years – this will be helped by the distinct tracks in India around identity, payments and data sharing,” they wrote in a report to customers on December 18th.
“Furthermore, we believe that PAYTM cial services are synergistic, aligned with the regulatory thought process, and scalable. Balance sheet risk is low, and PAYTM’s technological capabilities to leverage alternative datasets as well as designing custom products are some of the key value additions in the above scenario.”