“PayTM faces a serious risk of customer exodus, which significantly jeopardises its monetisation and business model,” said Macquarie in a note. It has increased loss estimates by 170 per cent over FY25 and 40 per cent over FY26, factoring 60-65 per cent decline in revenues due to lower payments and distribution revenues.
The firm also downgraded the rating on the stock to ‘underperform’, while sharply cutting the target price to ₹275 from ₹650. The stock fell 10 per cent to hit the lower band of ₹380 on the NSE.
Paytm has around 33 crore customers, 11 crore monthly transacting users and a subscription network of about 1.1 crore merchants.
“We assume a 50 per cent cash burn rate and 20x P/E multiple to normalised earnings from the distribution business,” it said, adding that transitioning to new banks will require KYC to be redone, indicating that migration within RBI’s February 29 deadline will be an “arduous task”.
Paytm has been in discussions with multiple banks to transition its nodal accounts for the wallet, FasTag, NCMC and other business verticals, which are currently backed by Paytm Payments Bank. Several banks such as HDFC and Axis have said they continue to work with Paytm in various aspects, but will await regulatory go-ahead before taking a call on any new business lines or initiatives.
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“Lending partners might re-look their relationship with PayTM,” said the note, adding that this could lead to a decline in lending business revenues in case partners scale down or terminate their relationship with PayTM. Aditya Birla Capital, one of Paytm‘s largest lending partners, has already pared down their BNPL exposure to ₹600 crore from a peak level of ₹2,000 crore, and is expected to go down further.
A year ago, in February 2023, Macquarie had upgraded the rating on Paytm to ‘outperform’ from ‘underperform’, raising the target price from ₹450 to ₹800. According to Axis Burgundy-Hurun list of India’s most valuable private companies, Paytm was the 80th most valuable company with a market value of ₹58,527 crore in 2023, led by 42 per cent gains in its shares over the year.
However, the recent RBI action, wiped off ₹16,000 crore in value for Paytm in the first two days itself, when it hit the 20 per cent lower circuit on both days. On January 31, 2023, the day of regulatory action, the stock had closed at ₹761 on the NSE.