Paytm shares down over 70% from issue price; is there any hope for an upside now?

Only the future can say whether shares of digital payment firm Paytm will be able to recover investors’ steep losses on Dalal Street or not. However, Dolat Capital sees a lucrative opportunity after the stock witnessed a steep fall since listing.

The company has witnessed an erosion of more than Rs 1 lakh crore of market value since listing due to several events like RBI barring the onboarding of new customers and brokerages downgrading its price.

Dolat Capital has set a price target of Rs 1,620 for Paytm, indicating an upside of over 185 per cent from the current market price of Rs 566.15. At present, shares of the company traded nearly 74 per cent down against the issue price of Rs 2,150. Meanwhile, the scrip hit an all-time low of Rs 520 on March 23, 2022.

The brokerage added that Paytm faces the double whammy of RBI notification for its Payment Bank restricting new customer onboarding and valuation capitulation for fintechs across the globe (especially for ‘high-growth but non-profitable stocks) in the listed space. The RBI notification while having a not material impact on financial prospects but would hurt the growth confidence and some potential impact on usage till the issue is resolved.

“We are assuming 100 basis points impact on our growth CAGR as the timeline is not clear. The monthly business metrics and overall momentum on revenue has been very strong and thus not much of worry per se,” Dolat Capital said in report.

On the other hand, Manoj Dalmia, founder and director, Proficient Equities said, “Paytm may fall till Rs 425 levels which might be scary for investors. However, buying is suggested after some price reversals with a proper base formation and crossing above Rs 800 levels. Fundamentally a good quarterly result along with proper business guidance might drive up the prices which might be a good time to buy.”

For the latest quarter ended December 31, Paytm posted a consolidated net loss to Rs 778.5 crore against a loss of Rs 535.5 crore in the same period a year ago. The consolidated revenue from operations, however, increased by about 88 per cent year-on-year (YoY) to Rs 1,456.1 crore during the reported quarter from Rs 772 crore.

Of late, Maquarie Research downgraded the target price of Paytm to Rs 450. “We believe, to gain scale and size, fintechs need to go beyond distribution and lend, for which they need licenses. With the RBI recently raising issues with PayTM payments bank and Chinese ownership being over 25 per cent, we believe the probability of PayTM getting a banking license is significantly lower now, thereby impeding its ability to lend. Given this, and competition from other fintechs in the payments space, we remain sceptical about PayTM’s longer-term ability to generate free cash flow,” the global financial firm said in a report on March 16.

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