Paytm hits new low despite clarifying that business is 'robust'

The stock hit a new low of Rs 536.20, fallen 5% from its intra-day high of Rs 562 on the BSE.

Shares of One97 Communications, the parent company of digital payments major Paytm, hit a new low of Rs 536.20, down 1.4 per cent on the BSE in Wednesday’s intra-day trade. The stock has fallen nearly 5 per cent from its intra-day high level of Rs 562, despite the company's clarifications to exchanges. 

“The company would like to point out that its business fundamentals remain robust as demonstrated in our last earning release dated February 04, 2022,” One 97 Communications said in a reply sought on the significant movement in its stock price.

As on date, there is no information/ announcement, which in our opinion may have a bearing on the price/ volume behaviour in the scrip of the Company and which is yet not disclosed to the Stock Exchanges, the company said.

In the past one month, the stock has tanked 35 per cent, as compared to a 1 per cent rise in the S&P BSE Sensex. The stock has lost 75 per cent from its issue price of Rs 2,150 per share. It hit a record high of Rs 1,961.05 on listing day i.e. November 18, 2021, in intra-day trade, but failed to touch its issue price post listing.

A sharp fall in Patym's market price has continued, owing to persistent negative news flow. The Reserve Bank of India (RBI) on March 11, 2022 barred Paytm Payments Bank (PPBL) from onboarding new customers with immediate effect because of certain supervisory concerns. PPBL processes transactions for India’s digital payments giant Paytm.

PPBL will need specific permission from the RBI to restart onboarding of customers following a review of the audit. Paytm has said that, PPBL was taking immediate steps to comply with RBI directions and was looking to appoint a reputed external auditor to conduct a comprehensive systems audit of its IT systems.

ICICI Securities believes this embargo will have an adverse impact on onboarding new customers for wallet, savings/current account. The ban on customer acquisition shall cripple business growth for Paytm PB, which is targeting to add half a billion customers to its fold. Also, it may defer PPBL’s plan to apply for conversion into small finance bank.

Meanwhile, on March 16, 2022, in a note on the company, Macquarie slashed Paytm’s target price to Rs 450 from Rs 700 earlier.

“The recent developments significantly reduce the probability of getting a banking license to lend, in our view. Other regulatory headwinds include the digital payments paper potentially capping wallet charges and tougher BNPL and KYC regulations,” the foreign brokerage firm said.

"The challenge in valuing Fintechs or new-age companies in general is negative earnings and FCF. Hence, multiples are based on sales numbers – the level of subjectivity here can be very high. Hence, multiples for such companies can correct very sharply. Risks to our recommendation include monetisation of UPI and receipt of a banking license", the brokerage firm said.