Paytm falls to 5% lower circuit again, stock down 50% from 52-week high

Paytm will likely experience a near-term financial impact on its business along with some permanent loss of business in FY25E, said UBS.

Paytm shares traded in the red for the third straight session on February 29. At 9:30am, the fintech stock was hovering on 5 percent lower circuit at Rs 385.90 on the National Stock Exchange (NSE). The counter lost 5 percent in the previous session as well.

The fall comes as investors remain unsettled despite Vijay Shekhar Sharma's resignation as part-time non-executive chairman and board member at Paytm Payments Bank.

The Paytm stock took a beating after the RBI crackdown on Payment Payments Bank on January 31. It tanked around 60 percent before recovering a bit by hitting the 5 percent upper circuit for several sessions back-to-back.

While Paytm has recouped losses to trade 20 percent above the 52-week low of Rs 318 hit on February 16, the stock is still around 50 percent below the January 31 closing price of Rs 761.20.

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According to brokerage firm UBS, Paytm will likely experience a near-term financial impact on its business along with some permanent loss of business in FY25. "We expect Paytm to lose 5-7ppt of its 25 percent share in the payments industry, driven by loss of wallet (2-3ppt permanent loss) and the rest due to merchant/customer churn," it said.

Analysts at UBS estimate Paytm's net payments margin to decline to 6-7bps range from 7-9bps, given the loss of high-margin wallet business and likely easier terms to retain merchants. The brokerage has maintained its ‘neutral’ rating on the stock while revising the target price downwards to Rs 510 per share from Rs 650 earlier.

Morgan Stanley also maintained an 'equal-weight' call on the stock with a target price of Rs 555. Goldman Sachs has a 'neutral' rating on the stock with a revised target price of Rs 450, down from Rs 860 per share earlier. Another international brokerage, Jefferies, has discontinued its rating on Paytm and has moved the counter to its list of 'non-rated' stocks.

Also Read | Here's what Macquarie makes of Paytm Payments Bank's board rejig

While several brokerages have either downgraded Paytm or cut the target price after the RBI action, Bernstein stayed bullish on the stock. Given the still depressed valuation and the removal of a major regulatory overhang, the brokerage sees considerable upside and maintained 'outperform' rating with a target price of Rs 600

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