Macquarie Securities India’s Suresh Ganapathy, one of the most bearish analysts on One 97 Communications, has slashed its price target on the stock by a staggering 35 percent to Rs 450 while maintaining its underperform rating.
Macquarie's price target for the stock is currently the lowest on the Street.
The brokerage firm has sharply marked down its valuation estimate for Paytm in line with the derating since in global financial technology companies. Ganapathy, in a note, said that the brokerage firm’s valuation for the Indian fintech major is premised on the valuation of global fintech firms.
Macquarie said that global fintech companies have seen their price-to-sales growth multiples slashed to 0.07-0.35 times from 0.3-0.5 times earlier driven by a wider recalibration of technology companies globally due to prospects of higher interest rates in the US.
“Note that we haven’t changed our earnings or revenue estimates for PayTM,” Macquarie said.
The sharp downgrade in price target from Macquarie comes days after the brokerage house had cut its price aim for Paytm to Rs 700 per share from Rs 900 per share following a ban slapped on it by the Reserve Bank of India for onboarding of new customers in its payments bank.
“We believe, to gain scale and size, fintechs need to go beyond distribution and lend, for which they need licenses. With the RBI recently raising issues with PayTM payments bank and Chinese ownership being 25 percent or more, we believe the probability of PayTM getting a banking licence is significantly lower now, thereby impeding its ability to lend,” Macquarie said.
The brokerage house believes that Paytm will face more headwinds on the regulatory side because of impending regulations from the RBI on digital payments, buy-now-pay-later, stricter know-your-customer and compliance norms.
“The challenge in valuing Fintechs or new-age companies in general is negative earnings and FCF. Hence multiples are based on sales numbers – the level of subjectivity here can be very high. Hence, multiples for such companies can correct very sharply,” Macquarie said.
Ganapathy warned investors that they should avoid bottom-fishing on the stock at the moment. Shares of Paytm have fallen close to 70 percent from its initial public offering price of Rs 2,150. The company’s IPO was launched in November 2021. Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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