Paytm shares fell to 1,165 ($ 15.71), the lowest since its market debut in November after the nation’s largest initial offer after a key brokerage firm further slashed its price on the ‘action of payments.
the Stock, which opened at 1,226 Monday, fell 5.3% as of 1:55 p.m. India standard time. Paytm, which has struggled to improve its share price since its inception, slipped 45% from its issue price of 2,150 ($ 28.9). The company’s market cap, at the time of publication, was $ 10.2 billion, almost half of what it had sought when it first started and below the $ 16 billion valuation at which it raised a financing round at the end of 2019.
The price drop follows brokerage Macquarie’s report on Monday in which it retained its lowest rating on One97 Communications, Paytm’s parent company, and reduced its target price to 900 ($ 12.14), against 1,200 that she had allocated before the market debut on November 18.
Macquarie was the only brokerage firm to have such a grim view of the outlook for Paytm when it first entered the market. Bernstein analysts, by comparison, had estimated that Paytm’s valuation would hover between $ 21 billion and $ 24 billion. (A spokesperson for Bernstein did not respond to a request for comment in November.)
“After releasing the various business updates and results, we believe our revenue projections, especially on the distribution side, are in jeopardy and therefore we are reducing our CAGR from 26% to 23% for fiscal years 21-26E. We are roughly reducing revenue estimates for FY21-26E by an average of 10% each year due to declining distribution and commerce / cloud revenue partially offset by higher payment revenue, ”said Macquarie analysts wrote on Monday.
“We reduced our profits (increase our loss projections) from 16% to 27% for fiscal year 22-25E due to lower revenues and increased expenses related to employees and software. We sharply reduced our TP (target price) by around 25% due to a lower target multiple of 11.5x (price / sales ratio) (vs. 13.5x earlier) and more sales inferior. Maintain UP with a revised TP of 900. “
The brokerage firm said RBI’s proposed regulation on digital payments could cap wallet fees, which would hurt Paytm’s business, where the payments side still accounts for 70% of the company’s overall gross income. Macquarie also cited the departure of senior executives from Paytm and the downsizing of tickets for loans disbursed by Paytm as other factors that could affect the company’s future outlook.
In a report released in the second half of December, Morgan Stanley analysts called Paytm’s stock “overweight” and gave it a price target of 1,875 ($ 25.2), saying the company was. “Well positioned to capitalize on the upcoming acceleration of digital distribution of financial / commerce services in India.
“The huge TAM (Total Addressable Market), India’s distinctive technology architecture and the regulatory support partnership approach are, in our view, key enablers. India is under-penetrated in financial services and we expect strong growth in all segments. More importantly, the penetration of digital third-party financial services distribution is considerably low and we will see a strong acceleration over the next five years – this will be helped by the distinctive rails in India around identity, payments. and data sharing, ”they wrote in a report to clients on December 18.
“Additionally, we believe Paytm’s financial services are synergistic, compliant with regulatory thinking and scalable. The balance sheet risk is low and Paytm’s technological capabilities to leverage alternative datasets as well as to design custom products is a key added value in the above context.