Paytm is running out of time, customers and friends: Macquarie sends three flares

Tuesday only got worse for Paytm and its parent firm One 97 Communications. The fintech share took a 9 per cent hit in Tuesday's trade after Macquarie cut its target price on the stock to Rs 275 compared with Rs 650. 

It was Macquarie, which came out with the first target on Paytm, when the scrip got listed back in 2019. Macquarie had then suggested a target of Rs 1,200 on the stock just ahead of Paytm's listing. 

'Serious risk of exodus of customers'

The brokerage in a stinging report said Paym faces "a serious risk of exodus of customers (overall 330mn customers and 110mn MTUs – monthly transacting users and merchant subscription network of 10.6mn) which significantly jeopardises its monetisation as well as its business model".

'Migration an ardous task'

Macquarie is also not convinced about the migration to other bank logic. "Moving payment bank customers to another bank accounts or moving related merchant accounts to other bank accounts will require KYC (Know your customer) to be done again based on our channel checks with partners, indicating that migration within RBI's Feb 29th deadline will be an arduous task".

'Lenders relooking partnership'

The brokerage sees a dip in Paytm's revenue saying lenders may have got cold feet post the RBI directive. "Our channel checks with some lending partners reveal that they are re-looking at their relationship with PayTM which eventually could lead
to a decline in lending business revenues in case partners scale down or terminate their relationship with PayTM. AB Capital, one of PayTM's largest lending partners, has already pared down their BNPL exposure to PayTM from a peak level of Rs20bn to Rs6bn currently and is expected to go down further in our view."

Also read:  Paytm shares plunged 9% today; bear case target at Rs 180, says Macquarie

Paytm fielded multiple warnings from regulators over the last two years about dealings between its popular payments app and is banking arm. The Reserve Bank of India has suspended much of the banking operation’s business, sending Paytm’s stock price down more than 40% from its January peak.