Paytm will continue to see sharp daily volatility; investors divided on ‘value’ in stock

At 11:35 am, the stock was quoting at Rs 464.50, down by 6 percent from previous close. Meanwhile, the Paytm stock had hit 10 percent upper circuit on February 8

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26 Aug, 2025 12:21

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Shares of One97 Communications, which operates Paytm, will continue to see sharp daily volatility as several institutional investors who have still not got a chance to exit the stock may be waiting for an uptick to unwind positions, while investors looking for value may want to exploit the steep decline to pick up stakes with a longer-term horizon, experts said.

At 11.35 am, the stock was quoting at Rs 464.50, down 6 percent from the previous close. The stock hit a 10 percent upper circuit on February 7.

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As of December 31, domestic mutual funds held a 6.07 percent stake in Paytm, while FPIs held 63.72 percent. No big blocks have been reported on the exchanges except a Rs 244-crore purchase by Morgan Stanley in a client account.

Market sources said a few funds upped their stakes on February 7 in order to bring down their purchase price and sensing a value play at current levels.

“Not too many domestic mutual funds may want to add to fresh positions considering this might require a lot more explaining in an institutional set up with so much uncertainty around, but high-networth individuals and family-offices are taking bolder bets,” the sources said.

Some mutual fund managers have also been sitting pretty, not selling down their stake, because of the worry their sales could accelerate the fall further.

"They may be looking to exit at every rise. Besides, several large funds which avoided Paytm thus far have done so because of lack of confidence in the business model, competitive advantage and monetisation potential," a leading fund manager said on the condition of anonymity.

It's unlikely mutual fund managers belonging to this camp will look at Paytm as an opportunity now. Besides, banks are becoming iffy about unsecured lending anyway, which will make growth in loan book harder for Paytm, he added.

More than hard core public market investors, private equity/venture kind of investors and family-offices are likely to take bolder bets on Paytm.

Paytm seems to offer great value especially when compared to other unlisted companies in the payments space including BharatPe and PhonePe. PhonePe last valuation was $12 billion, while Paytm's current market cap is $3.4 billion.

In an exclusive interview to Moneycontrol, Hiren Ved, chief investment officer of Alchemy Capital, said Paytm could build a profitable business model with its customer data, even if it loses the wallet business. It was unique because it had a platform for customers and businesses and could cross-sell services between them. Though the company quantified the impact of the central bank's restriction, it was unclear how much time it would take to claw back what it lost, he said.