Paytm shares: Macquarie slashes Paytm target price to Rs 275 from Rs 650. Here's why

Foreign brokerage Macquarie has slashed its target price on One 97 Communications Ltd (Paytm) to Rs 275 from Rs 650 earlier, as the fintech major "fights for survival". Macquarie said its target cut on Paytm was driven by a sharp reduction in revenues across various segments. Post the recent regulatory changes and diktats, Paytm now faces a serious risk of exodus of customers, which significantly jeopardises its monetisation as well as its business model.

To recall, Macquarie was the same brokerage, which initiated coverage on the Paytm stock at Rs 1,200, on the day of its listing in November 2021, over its issue price of Rs 2,150 per share. In 2023, Macquarie double upgraded stock, upping its target from a low target of Rs 450 that it suggested on the counter. The fresh target is the lowest by the brokerage on the Paytm stock. The Macquarie note came a day after the RBI governor Shaktikanta Das suggested that there was no room for the central bank to review the regulatory action on Paytm Payments bank. 

"We cut revenues sharply as we reduce both payments and distribution business revenues (60-65 per cent over FY25/26E). Moving payment bank customers to another bank accounts or moving related merchant accounts to other bank accounts will require KYC (Know your customer) to be done again based on our channel checks with partners, indicating that migration within RBI's February 29 deadline will be an arduous task," the brokerage said.

Macquarie said its channel checks with some lending partners reveal that they are re-looking at their relationship with Paytm, which eventually could lead to a decline in lending business revenues in case partners scale down or terminate their relationship with Paytm. 
 

AB Capital, one of Paytm's  largest lending partners, has already pared down their BNPL exposure to Paytm from a peak level of Rs 2,000 crore to Rs 600 crore currently and is expected to go down further, Macquarie said.

Macquarie upped its loss estimates for Paytm by 170 per cent in FY25 and 40 per cent in FY26, factoring 60-65 per cent decline in revenues due to lower payments and distribution revenues
 

It downgraded the stock to undeperform. "We assume a 50 per cent cash burn rate and 20 times P/E multiple to normalised earnings from its distribution business.

Also read: Stock recommendations by analyst for February 13: Wipro, Kalyan Jewellers and Dr Reddy's