Paytm's target cut by Macquarie due to regulatory woes

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Macquarie dramatically cut its 12-month price target on One97 Communications Ltd, parent company of digital payments firm Paytm, citing heightened regulatory scrutiny. Macquarie, which had predicted a downturn in Paytm before the listing, cut its target to Rs 275, the most brutal by any major brokerage firm.

Paytm, which ended Monday's trading session at 419.85 Indian rupees, is battling pressure from the Indian central bank. The Reserve Bank of India recently ordered Paytm to shut down Paytm Payments Bank, its affiliate that processes all its transactions.

The Suresh Ganapathy-led analyst group wrote in a note on Tuesday that it believes Paytm's revenue will decline significantly and the regulatory action poses a “serious risk of customer exodus”. At Rs 275, Paytm's market cap would have reduced to around $2.1 billion.

“We saw sharp reduction in revenues as we reduce both payments and delivery business revenues (60-65% over FY25/26E). Transfers to Payments Bank customers to other bank accounts or transfer of related merchant accounts to other bank accounts will again require KYC (Know Your Customer) based on our channel checks with partners indicating that The transfer will be a difficult task to meet the RBI's February 29 deadline. ,

Macquarie said Paytm – which makes most of its money by lending – may also face challenges in retaining its lending partners. “Our channel's checks with some of the lending partners suggest that they are reconsidering their relationship with PayTM, which may ultimately lead to the lending partners reducing or terminating their relationship with PayTM. There may be a decline in business revenue. AB Capital, one of the largest lending partners of PayTM, has already reduced its BNPL exposure in PayTM to Rs 6 billion from a high of Rs 20 billion currently and this is expected to go down further in our view. Is.

More to follow.