Paytm parent One 97 Communications is down 50 percent since the RBI cracked down on its banking arm but mutual funds are not bottom-fishing yet. Fund managers Moneycontrol spoke to said compliance issues and regulatory overhang were keeping them at bay.
"We have no idea what’s going on. It is difficult to predict anything and take a call on the investment horizon when the regulators are involved so strongly," the chief investment officer of a mid-sized asset management company said requesting anonymity.
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At the end of the December quarter, mutual funds held 4.99 percent stake in Paytm, up from 2.79 percent in the previous quarter.
Nippon and Mirae held more than a percent stake in Paytm, at 1.05 percent and 2.5 percent, respectively.
On January 31, the RBI directed Paytm Payment Bank to stop accepting deposits, credit transactions or top ups in customer accounts, prepaid instruments, wallets, FASTags, and NCMC cards after February 29, other than any interest, cashbacks, or refunds. It also ordered the payments bank to settle all pipeline transactions and nodal accounts by March 15.
Another fund manager said that they are answerable to unitholders if they decide to put money in Paytm, especially when there's no clear roadmap for the business going ahead.
It is also risky to bet on the company at this juncture as several investors are still getting out of the stock, which means selling pressure is expected to continue, the fund manager added.
The Street remains divided on the impact on the lending business due to RBI curbs on Paytm Payments Bank.
Some brokerages see a huge customer exodus impacting loan distribution, while some say the impact will only be on the wallets business. The payments bank houses all of Paytm's 33 crore wallets.
That said, Paytm is expected to see some slow down in the lending business, as the RBI has tightened the screws on unsecured consumer loans.
In November, the central bank increased the risk weight on the consumer credit exposure of commercial banks and non-banking finance companies (NBFCs) by 25 percentage points. This means more capital has to be set aside for personal loans, bringing down the quantum of unsecured lending.
The biggest impact will be on fintechs such as Paytm, which partner with banks and NBFCs to distribute buy-now-pay-later, merchant and personal loans, analysts said.
Soon after the RBI increased risk weights, One97 Communications announced plans to slow down its small-ticket postpaid loans (below Rs 50,000) while looking to expand big-ticket personal loans and merchant loans.
On February 13, Macquarie gave an "underperform" rating for the Paytm stock and more than halved the target price to Rs 275 from Rs 650.
Their channel checks suggest that some lending partners of Paytm are re-looking at their relationship with the company due to reputational concerns, Macquarie analysts wrote in the note.
The broking firm sees a 60-65 percent decline in revenues for One97 Communications due to lower payments and distribution revenue.
"AB Capital, one of Paytm's largest lending partners, has already pared down their BNPL exposure to Paytm from a peak level of Rs 2,000 crore to Rs 600 crore currently and is expected to go down further in our view," Macquarie said.
At 2.09 pm, Paytm was trading at Rs 344.05 on NSE, down 9.5 percent from the previous close.
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