Shares of Paytm plummeted 20% to the lower circuit for the second day in a row on February 2, following the Reserve Bank of India’s (RBI) strict actions against its lending operations. This comes after the RBI imposed restrictions on Paytm, including a ban on accepting new deposits and executing credit operations post-February 29. The regulatory scrutiny led to a cautious stance from brokerages, resulting in lowered stock target prices.
Similarly, Macquarie adjusted its target price for Paytm to Rs 650 per share, maintaining a ‘neutral’ outlook. The firm highlighted the absence of a short-term remedy for Paytm’s difficulties, attributing this to significant issues identified by the RBI. The central bank’s ongoing scrutiny, including a comprehensive IT audit revealing persistent non-compliance, suggests the seriousness of the lapses.
In response to the RBI’s findings, Paytm announced a temporary halt to its lending platform operations while it seeks to establish partnerships with banks. Bhavesh Gupta, Paytm’s COO, mentioned ongoing discussions with lenders to address their concerns and assess the potential impact on their portfolio.
Paytm also estimated a potential adverse effect on its annual EBITDA in the range of Rs 300-500 crore. Furthermore, analysts and fund managers anticipate a 5-15% impact on the company’s earnings per share (EPS), raising alarms over its path to profitability, especially with prior expectations of reaching EBITDA breakeven by FY25.