Macquarie slashes Paytm price target to Rs 450

Digital major Paytm is not having a great run on the bourses with the stock down nearly 70 per cent when compared to the highs of Rs 1961 it touched in November last year on the day of its debut.

On Thursday, the stock was trading down nearly 3 per cent at Rs 616 during the morning session even as the benchmark Sensex was up nearly 1,000 points. The stock has lost nearly 28 per cent in the last one month even as the Sensex has remained largely flat with heightened volatility.

To add to the company woes, global financial major Macquarie has once again slashed its price target for the digital major citing regulatory headwinds including a falling probability of getting a banking licence.

Interestingly, this is the second time that the global major has slashed its target for Paytm. It initiated coverage on the stock in November last year with a target price of Rs 1,200, which was cut to Rs 700 last month and now has been further slashed to Rs 450.

“Recent developments significantly reduce the probability of getting a banking license to lend, in our view,” stated the Macquarie report while highlighting the recent Reserve Bank of India (RBI) action against the fintech firm's subsidiary, Paytm Payments Bank and the problem of Chinese ownership, which is in excess of 25 per cent.

“RBI’s regulations on digital payments and BNPL (Buy Now Pay Later), and stricter KYC and compliance norms will all be adverse developments for fintech companies in general, potentially bringing down unit economics and/or growth, in our view. We see these as additional headwinds for Paytm, which could cloud its path towards profitability,” added the report released on Wednesday.

Earlier this week, RBI barred Paytm Payments Bank from onboarding new customers and directed it to appoint an IT audit firm to conduct a comprehensive system audit of its IT systems.

Meanwhile, Macquarie has maintained its rating of ‘underperform’ on Paytm even as the 12-month target price has been cut by nearly 36 per cent when compared to the earlier target price of Rs 700.

The financial major has also highlighted the fact that globally fintechs have corrected sharply in the recent past with the price-to-sales ratio of such companies falling from a range of 0.3-0.5 in November 2021 to the current range of 0.07-0.35.

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