Paytm sinks to record low as Macquarie expects more downside
Published On: Monday, January 10, 2022 | By: Team KnowMyStock
Shares of One97 Communications, the parent company of digital payments major Paytm, hit a new low of Rs 1,153, down 6 percent on the BSE in Monday’s intra-day trade after global brokerage Macquarie maintained its ‘underperform’ rating on the stock and reduced its target price (TP) to Rs 900. It also suggested that the company’s future earnings growth may be worse than it had earlier forecast. The target suggests a 58 percent downside over the issue price of Rs 2,150. From prevailing levels, the target suggests 26 percent downside potential. Shares of Paytm have had an abysmal journey on Dalal Street so far since listing in November last year. The brokerage firm has also cut its earnings projections for Paytm. “We are roughly cutting revenue estimates for FY21-26E on an average by 10% every year due to lower distribution and commerce/cloud revenues offset partially by higher payment revenues,” Macquarie said.
It added that loss projections have been increased by 16-27% for FY22-25E owing to lower revenues and higher employee and software expenses. The Reserve Bank of India’s proposed digital payments regulations could cap wallet charges. Payments business still forms 70 per cent of overall gross revenues for Paytm, and hence any regulations capping charges could impact revenues significantly. Add to that, Paytm’s foray into insurance was recently rejected by the insurance regulator Insurance Regulatory and Development Authority (IRDA).
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