New Delhi: Shares of Paytm experienced an 18% decline in afternoon trading on December 7, following the company’s announcement of a slowdown in its small-ticket postpaid loans. Paytm intends to focus on expanding high-ticket personal loans and merchant loans. This decision has led to a negative reaction from brokerages, prompting them to revise their revenue estimates for the company.
As of 12:42 pm, Paytm shares were trading at Rs 666.50 on the NSE, having hit a 20% lower circuit earlier in the day. The stock’s sharp decline resulted in a notable increase in trading volumes, with three crore shares changing hands, significantly surpassing the one-month daily traded average of 50 lakh shares.
During an analyst meeting, Paytm revealed that postpaid loans could decrease by half, but the company asserted that this would not impact margins or revenue significantly. Paytm explained that postpaid had the lowest take rate, minimizing the revenue impact. Jefferies, a brokerage firm, noted that Paytm’s adjustment in its ‘Buy now pay later’ (BNPL) business was a response to lending partners pulling back following the RBI’s recent measures on unsecured lending. Jefferies projected a 50% reduction in BNPL disbursals over the next 3-4 months, with the management aiming to offset this by expanding high-ticket personal loans and merchant loans. However, Jefferies expressed concerns that the tightening of the BNPL business exceeded expectations.
Paytm’s stock experienced a 20% lower circuit during early trade and was down by 16.60% at Rs 678 apiece. This decline contrasted with a 0.37% drop in the NSE Nifty 50 as of 10:22 am. Year-to-date, Paytm’s stock has risen by 27.55%. The total traded volume for the day was 17 times its 30-day average, and the relative strength index indicated that the stock may be oversold.
Bloomberg data revealed that out of 15 analysts tracking the company, 10 recommended a ‘buy,’ while five suggested a ‘hold.’ The average 12-month analyst price targets implied a potential upside of 24%.
