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One another setback for Paytm! In a new downgrade, Macquarie lowers its target price; shares plummet 10%

<p>Paytm share price today: On the Bombay Stock Exchange (BSE), Paytm shares had a sharp decrease today of up to 9.88%, closing at Rs 380.10. This decline followed the problematic fintech startup run by Vijay Shekhar Sharma being downgraded by global brokerage firm Macquarie from a neutral recommendation to underperform. Moreover, Macquarie lowered Paytm’s target price to Rs 275, citing worries about the company’s potential for client attrition, which would seriously jeopardize its ability to generate revenue and sustain a profitable business model.</p>
<p><img decoding=”async” class=”alignnone wp-image-404100″ src=”https://www.theindiaprint.com/wp-content/uploads/2024/02/theindiaprint.com-one-another-setback-for-paytm-in-a-new-downgrade-macquarie-lowers-its-target-price.jpg” alt=”theindiaprint.com one another setback for paytm in a new downgrade macquarie lowers its target price” width=”1077″ height=”606″ title=”One another setback for Paytm! In a new downgrade, Macquarie lowers its target price; shares plummet 10% 30″ srcset=”https://www.theindiaprint.com/wp-content/uploads/2024/02/theindiaprint.com-one-another-setback-for-paytm-in-a-new-downgrade-macquarie-lowers-its-target-price.jpg 400w, https://www.theindiaprint.com/wp-content/uploads/2024/02/theindiaprint.com-one-another-setback-for-paytm-in-a-new-downgrade-macquarie-lowers-its-target-price-390×220.jpg 390w, https://www.theindiaprint.com/wp-content/uploads/2024/02/theindiaprint.com-one-another-setback-for-paytm-in-a-new-downgrade-macquarie-lowers-its-target-price-150×84.jpg 150w” sizes=”(max-width: 1077px) 100vw, 1077px” /></p>
<p>Suresh Ganapathy of Macquarie provided an explanation of the downgrading, citing a shift in approach from price/sales to fair value on normalized distribution company profitability, as per an ET article.They changed our target price from Rs 650 to Rs 275 as a consequence.<br />
Ganapathy said that the value would have been Rs 225 using their prior technique. Ganapathy further emphasized the higher loss predictions by 170%/40% over FY25/26, taking into account a notable drop in income as a result of decreased revenues from payments and distribution. In addition, the brokerage used a 20x PE multiple to normalized profits from the distribution sector and a 50% cash burn rate.</p>
<p>The difficulties Paytm may have in transferring its merchant accounts and payment bank clients to other banks were noted in the Macquarie research. This would need repeating Know Your Customer (KYC) verification, which would make the migration challenging to complete by the Reserve Bank of India’s (RBI) deadline of February 29.<br />
According to the report, several lending partners are reassessing their partnership with Paytm. This might result in a reduction in lending business revenues if partners decide to curtail or stop their affiliation with the fintech firm.<br />
Regarding the performance of Paytm’s shares, Macquarie offered two possibilities. In a bull market situation, a 25% drop in distribution income may cause the stock to rise as high as Rs 540. But in the worst-case scenario, if distribution revenues fall by 75%, the stock would go as low as Rs 180.<br />
Regulators have lately taken action against Paytm, including banning the Paytm wallet’s host bank, Paytm Payments Bank. Governor of the Reserve Bank of India (RBI), Shaktikanta Das, has said that there isn’t much space for reevaluating the steps done against Paytm. “We go for imposing business restrictions when constructive engagement doesn’t work or when the regulated entity doesn’t take effective action,” Das said. Our response is commensurate with the seriousness of the circumstance.”<br />
About half of the value of Paytm shares has been lost since the RBI banned them on January 31st. Retail investors have been advised by market professionals to hold off on buying Paytm shares until the business has resolved its regulatory difficulties.<br />
On the other hand, international brokerage company Bernstein has established a target price of Rs 600 and recommended a buy the dip approach.</p>

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