Produced by: BT Desk
On Monday, Jefferies became the first major foreign brokerage to drop coverage on Paytm-operator One 97 Communications Ltd. until the news flow around the fintech “settles down”.
The investment bank moved the stock to “not rated”, weeks after lowering it to underperform after the RBI last month ordered Paytm Payments Bank to halt its key operations, citing non-compliance.
A chunk of Paytm’s valuation (Rs 139,000 crore) during IPO was drawn from the value that it could apply for a small finance bank (SFB) licence.
After RBI’s latest diktat, the option value has become zero. But Paytm has the largest payment ecosystem in the country, about 10 crore monthly users, 3.9 crore registered merchants and a gross merchandise value (GMV) of Rs 5.1 lakh crore.
With Axis Bank stepping in as nodal bank, this value may dip further. Paytm's efforts to monetise the payment ecosystem has met with limited success.
RBI’s move to increase the risk-weights on unsecured loans of banks and NBFCs could impact the firm's loans disbursement system.
Paytm has around Rs 8,900 crore cash on books, as of December-end, which is around Rs 140 per share. But is it enough to cushion risks?
Valuation has fallen, business uncertainties have increased manifold, and the company has an RBI hit. Given the uncertainty and no profitability in sight, it's a long haul for the stock.