Paytm Shares Down More Than 70% From Issue Price; is there hope for a rise now?

Only time can tell whether or not shares of digital payment company Paytm will be able to recoup the heavy losses from investors on Dalal Street. However, Dolat Capital sees a lucrative opportunity after the stock has seen a steep drop since listing.

The company has seen an erosion of more than Rs 1 lakh crore in its market value since its introduction due to several events such as RBI banning the onboarding of new clients and brokers lowering its price.

Dolat Capital has set a price target of Rs 1,620 for Paytm, indicating an upside of more than 185% from the current market price of Rs 566.15. At present, the shares of the company have traded nearly 74% off the issue price of Rs 2,150. Meanwhile, the certificate has reached an all-time low of Rs 520 on March 23, 2022.

The brokerage added that Paytm is facing the double whammy of the RBI notification for its payment bank limiting new customer onboarding and valuation capitulation for fintechs across the world (especially for ” high-growth but unprofitable stocks) in the listed space. The RBI notification, while not materially impacting the financial outlook, would hurt growth confidence and potentially impact usage until until the problem is solved.

“We assume a 100 basis point impact to our growth CAGR as the timing is unclear. Monthly trade metrics and overall revenue momentum have been very strong and therefore of little concern on their own,” Dolat Capital said. in the report.

On the other hand, Manoj Dalmia, Founder and Director of Proficient Equities, said, “Paytm could drop to levels of Rs 425 which could be scary for investors. However, buying is suggested after some price reversals with proper foundation formation and crossing above the Rs 800 levels. might be a good time to buy. »

For the last quarter ended December 31, Paytm recorded a consolidated net loss of Rs 778.5 crore compared to a loss of Rs 535.5 crore in the same period a year ago. However, consolidated operating revenue increased by around 88% year-on-year (YoY) to Rs 1,456.1 crore in the quarter under review, from Rs 772 crore.

Lately, Maquarie Research lowered the target price of Paytm to Rs 450. “We believe that in order to gain scale and size, fintechs need to go beyond distribution and lending, for which they need licenses. With the RBI recently raising issues with payment bank PayTM and Chinese ownership exceeding 25%, we believe the likelihood of PayTM obtaining a banking license is now significantly lower, hampering its ability to lend. Given this and competition from other fintechs in the payments space, we remain skeptical of PayTM’s long-term ability to generate free cash flow,” the global finance company said in a report on 16 March.

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Richard L. Militello