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Paytm crashes to record low as Macquarie sees threats from Jio Finance

Apart from Macquarie's commentary, heavy supply of shares from institutional investors are also a drag

November 22, 2022 / 02:12 PM IST

Shares of One 97 Communications, which runs digital wallet Paytm, slumped to an all-time low on Tuesday after analysts termed the upstart Jio Financial Services (JFS) to be a potential threat for the payments services provider.

Paytm shares crashed over 10 percent on the BSE to a low of Rs 476.65. The stock has been on a downward journey for a while, which was accelerated by the dumping of shares by Softbank last week. In the last one week, the stock went down 23 percent.

Reliance Industries (RIL) recently made an announcement to demerge its financial services business and rename it Jio Financial Services (JFS). The company could be the fifth-largest financial services company in India in terms of net worth behind HDFC twins, SBI, ICICI Bank and Axis Bank, said an analyst with Macquarie.

“While it is too early to understand the exact customer segments and target markets that Jio Financial plans to cater to, it seems clear that it will be focused on consumer and merchant lending, which is the mainstay of NBFCs like Bajaj Finance and fintechs like Paytm,” said Suresh Ganapathy, analyst at Macquarie Capital Securities (India).

Read: RIL's fintech ambitions could create India's 5th largest financial services firm: Macquarie

Heavy supply

Apart from this, heavy supply of shares from institutional investors are also a drag. SVF India Holdings (Cayman) offloaded 2.93 crore shares in Paytm at an average price of Rs 555.67 per share, which are worth Rs 1,630.89 crore. SVF, as of September 2022, held 11.32 crore shares or 17.45 percent stake in Paytm. It plans to offload more shares.

In the same bulk transaction last week, BofA Securities Europe SA acquired 50.26 lakh shares in the Paytm operator, Morgan Stanley Asia Singapore PTE bought 60.03 lakh shares, and Societe Generale - ODI purchased 70.85 lakh shares through open market transactions. They bought these shares at an average price of Rs 555 per unit and their total buying price stood at Rs 1,005 crore.

Read: Paytm block sales: Despite post lock-in selling pressure, analysts positive on stock

Analysts mixed

Analysts are largely divided on the stock despite a fall in prices. Sumeet Kariwala, Equity Analyst at Morgan Stanley, is 'equal weight' on Paytm with a target price of Rs 785. Yes Securities also has a 'neutral' rating.

Citi Research raised its target price on the stock to Rs 1,055. JP Morgan is also 'overweight' as it sees good reasons for the business to break even. It has a target price of Rs 1,100, up from Rs 1,000 earlier.

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Shubham Raj has five years of experience covering capital markets. He primarily writes on stocks with special focus on PMS-AIF industry, telecom and new-age companies. His last stint was with The Economic Times where he wrote on stock markets and led IPO reportage.
first published: Nov 22, 2022 02:00 pm