Paytm crashes 20% due to plans to reduce postpaid loan volume

Paytm's stock fell 20% after the company revealed plans to increase high-end personal and merchant loans while decreasing small-ticket postpaid loans. Brokerages reduced revenue projections as a result of the move, and the stock was placed on the lower circuit. Paytm stated that the 'Buy now pay later' business is being recalculated in reaction to loan partners pulling back.

The sharp fall in the stock also triggered a spike in volumes as 3 crore shares changed hands so far, significantly higher than the one-month daily traded average of 50 lakh shares. 

The company said at its analyst meet that its postpaid loans could fall to half, but it would not have any impact on margins or revenue. Postpaid had the lowest take rate and hence revenue impact will be minimal, the company added.

Brokerage firm Jefferies stated that Paytm's decision to recalibrate its 'Buy now pay later' (BNPL) business came as lending partners dialed back after RBI's recent move on unsecured lending. BNPL disbursals, which make up 55 percent of total disbursements will halve in the next 3-4 months, Jefferies stated in a note. Even though the management plans to partially offset it by scaling up its high-ticket personal loans and merchant loans, Jefferies feels that the quantum of tightening for the BNPL business is ahead of expectations.

On that account, the brokerage slashed its FY24-26 revenue estimates for Paytm by 3-10 percent, also triggering a cut in adjusted EBITDA estimates by 12-15 percent. Not just that, Jefferies also revised its price target for the stock downward by over 19 percent to Rs 1,050 even as it retained its 'buy' call on Paytm.

Motilal Oswal Financial Services also believes that Paytm's total disbursement run rate is also likely to decline to around Rs 4,500 crore per month from of about Rs 6,000 per month. "Paytm adds average 3.5-4 lakh customers every quarter, which is also expected to come down by 50 percent," MOFSL added.