One 97 Communications Ltd (Paytm), whose shares are down 7.4 per cent in the last five sessions in an otherwise rally in the stock market, hosted an analyst call to discuss the evolving environment around its loan distribution business and key takeaways, as per Motilal Oswal Securities, were that the macro headwinds were warranting a growth moderation and that Paytm was re-orienting its strategy toward higher ticket size loans.
Motilal Oswal, which attended the analyst meet, said Paytm’s strategy to move away from small ticket size BNPL loans will affect the total loan originations via the platform as the segment forms over 50 per cent of total disbursements. Paytm, it said, indicated the monthly post-paid loan sourcing run rate to moderate by 50 per cent from Rs 3,000 crore to about Rs 1,500 crore.
"As a result, the total disbursement run rate is expected to decline to around Rs 4,500 crore per month from of about Rs 6,000 crore per month. Paytm adds average 3.5-4 lakh customers every quarter, which is now expected to come down by 50 per cent. Paytm believes that its sourcing funnel will be largely unaffected, as credit-worthy customers will be able to use the post-paid services," Motilal Oswal Securities said in a note.
The domestic brokerage said Paytm's take rates are expected to be marginally affected as BNPL as a product has lower take rates; however, a pick-up in higher ticket size personal loans should offset the overall impact.
"While the longevity of these measures and the outlook in low-ticket unsecured loans remains under watch, we trim our FY24/FY25 disbursement estimates by 15-18 per cent, reflecting the current developments," Motilal Oswal said.
Meanwhile, for higher ticket size loans, Paytm will continue to receive distribution commission but will not get any collection commission.
The company is de-focussing on post-paid (BNPL) and personal loans below Rs 50,000 to avoid any asset quality issues, given rising concerns in these segments. Additionally, Paytm has moved away from some specific cohorts of customers in
Post-paid and will continue to carefully monitor risks and asset quality metrics in this segment, Motilal Oswal said.
"Paytm mentioned that the scale-down in post-paid business is primarily prudential in nature and is to pre-empt any asset quality issues in coming quarters. Asset quality metrics remain steady and the pick-up in high-ticket personal loans and merchant loans, along with the increase in the number of lending partners, should support steady growth in the medium term," Motilal Oswal said.
This brokerage values Paytm at 20 times FY28E EV/Ebitda and discount the same to FY25E at a discount rate of 14 per cent to arrive at a target of Rs 1,025. Motilal Oswal retained its 'Buy' call on the Paytm stock.
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