Since its listing in November, the shares of One-97 Communications-backed Paytm have been on a roller-coaster ride. The counter hits a new 52-week low to Rs 1151 per share. After slipping over 6.5 per cent on the BSE intraday trade on Monday.
The stock entered the bourses on 18 November 2021. It was listed at Rs 1955, a discount of 9.07% compared with the initial public offer (IPO) price of Rs 2150. The counter has declined nearly 45% from its IPO price.
The IPO of Paytm was subscribed 1.89 times. The issue opened for bidding on 8 November and it closed on 10 November. The price band of the IPO was fixed at Rs 2080 to Rs 2150 per share.
Selling emerged after a foreign brokerage reportedly initiated coverage on the scrip with an ‘Underperform’ rating and a price target of Rs 900. The brokerage house said that it sees “no sign of headwinds abating”. The target price is 25% lower than the current levels.
The brokerage firm slashed its price target for the stock by 25 percent to Rs 900 from Rs 1,200 earlier. This implies a further downside of 28 percent from the January 7 closing. Macquarie retained its ‘underperform’ rating on the stock.
Macquarie’s pessimism for the company comes when the stock has already fallen more than 38 percent from its high of Rs 1,955 on November 18, which followed a disastrous debut on Dalal Street.
“Post the various business updates and results, we believe our revenue projections, particularly on the distribution side, are at risk,” Macquarie said in a note.
Macquarie said Paytm’s payment business still accounts for 70 per cent of overall gross revenues. Hence any regulation capping charges could impact revenues significantly. Moreover, it said, Paytm’s foray into insurance was recently rejected by IRDAI. This made Macquarie believe that it could also impact its prospects of getting a banking license.
More importantly, Macquarie is concerned about Paytm’s lending operations. Which the company’s management had touted as an important growth driver before the initial public offering. Macquarie noted that Paytm’s average loan ticket size has been declining and stands at below Rs 5,000.
Paytm is one the largest payments platform in India based on the number of consumers, number of merchants, number of transactions, and revenue ended March 2021. The company launched Paytm in 2009. It is a mobile-first digital payments platform to enable cashless payments for customers giving them the power to make payments from their mobile phones. It started with bill payments and mobile top-ups as the first use cases. Paytm Wallet is the first Paytm Payment Instrument.
The company reported a consolidated net loss of Rs 473.50 crore in Q2 FY22, higher than the net loss of Rs 436.70 crore in Q2 FY21. Net sales jumped 63.64% to Rs 1086.40 crore in Q2 FY22 over Q2 FY21. Pre-tax loss stood at Rs 471.50 crore in Q2 FY22, higher than the pre-tax loss of Rs 428.30 crore in Q2 FY21. Revenue growth was driven by a 52% growth in non-UPI payment volumes (GMV) and more than three times growth in financial services and other revenue.