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'Heat from Jio Financial Services': Paytm stock crashes 11% to hit 52-week low

'Heat from Jio Financial Services': Paytm stock crashes 11% to hit 52-week low

Paytm share price: The stock slumped more than 11 per cent to hit a fresh one-year low on Tuesday after a group of Macquarie analysts suggested that Jio Financial Services can pose a "significant risk" for the digital payments firm.

Paytm share price: A total of 14.52 lakh shares changed hands, amounting to a turnover of Rs 71.63 crore. Paytm share price: A total of 14.52 lakh shares changed hands, amounting to a turnover of Rs 71.63 crore.

Shares of One 97 Communications, Paytm's parent, slumped more than 11 per cent to hit a fresh one-year low on Tuesday trade after Macquarie analysts suggested that Jio Financial Services can pose a "significant risk" for the digital payments firm. Reliance Industries (RIL) recently announced that it would demerge its financial services business and rename it Jio Financial Services (JFS).

Paytm today plunged as much as 11.54 per cent to hit a record low of Rs 474.30 on BSE. The stock finally settled 11.02 per cent lower at Rs 477.10 today. Before this, the scrip had an all-time low of Rs 511 (May 12).

A total of 14.52 lakh shares changed hands, amounting to a turnover of Rs 71.63 crore. The company's market capitalisation (m-cap) stood at Rs 30,971.21 crore, down Rs 89,000 crore from its peak value of around Rs 1.2 lakh crore.

The stock plunged more than 21 per cent in the last five trading sessions. On a year-to-date (YTD) basis, it has declined around 64 per cent.

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Jio disruption

Jio Financial Services, Macquarie said, has articulated that it plans to launch a consumer and merchant lending business based on proprietary data analytics to complement and supplement the traditional credit bureau-based underwriting. Macquarie said the focus seems to be on consumer and merchant lending, which is the mainstay of NBFCs like Bajaj Finance and fintechs like Paytm.

"Among NBFCs (non-banking financial services)/fintech, Bajaj Finance and Paytm could be the most at risk," Macquarie Capital Securities (India) Pvt Ltd stated in its report. Shares of Bajaj Finance, however, traded on a flat note today.

Paytm made a tepid debut at the exchanges in November last year. Since then, the shares have mostly recorded losses.

At Tuesday's low levels, the stock was down 78 per cent over its IPO issue price of Rs 2,150.

What do technical charts say?

Market participants largely remained 'bearish' on the stock due to the lock-in period expiry, pre-IPO investor's exit and Jio's apparent entry into the fintech space.

Osho Krishan, Sr. Analyst - Technical & Derivative Research, Angel One Ltd, "Paytm is in a secular downtrend and is placed at its lifetime lows. The stock has been in a cycle of lower lows - lower highs, and there has been no respite from the ongoing sell-off in the counter. Technically, all the major indicators are in the bearish tune, indicating inherent weakness in the counter. As the counter has breached the previous swing low of Rs 510-odd levels and entered the new low zone, there is no pit stop on a technical basis. On the flip side, the bearish gap of the Rs 535-600 zone remains the major hurdle in the comparable period."

Prashanth Tapse, Research Analyst, Sr VP Research, Mehta Equities Ltd, said: "An overhang on the stock comes from the end of one-year mandatory lock-in for pre-IPO investors in Paytm. Along with this challenge, Paytm may also feel more heat coming from Jio Financial services which would be stepping into the turf of Paytm, PhonePe, and even Bajaj Finance's business model. This is an alarming note for the space and investors gave a lot of time for such cash-burning companies to sustain and make money but a majority of them failed to keep the profit dream alive. Hence lots of pre-IPO investors are looking for exits or buyouts of their stakes. Overall, we remain neutral to negative in such development."

A R Ramachandran from Tips2trades said, "Despite decent Q2 FY23 results, the exit of anchor investors and correction in mid- and small-cap stocks have triggered a strong sell-off in Paytm which has even today slumped to a 52-week low. The stock is currently very oversold."

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He further stated that investors should only buy the stock if the daily close is above Rs 560 for a target of 628-670 in the near term.

Paytm recently announced second quarter (Q2) results for the financial year 2022-23 (FY23) and posted a 76 per cent year-on-year growth in revenue, at Rs 1,914 crore. The company's losses were reduced by 11 per cent on a sequential basis.

Meanwhile, Indian equity benchmarks traded higher today, pausing a three-session decline.