Paytm hits over 8-month low; stock tanks 38% from its 52-wk high of October

Shares of One97 Communications, which owns fintech player Paytm, slipped 3 per cent to hit the lowest level in over eight months on Wednesday. The stock fell to Rs 596.85 on the BSE, its lowest level since March 22, 2023.

The stock of the fintech firm has remained under pressure since it announced it will scale down small-ticket size loans, especially, those below Rs 50,000.

Thus far in the month of December, the market price of Paytm has tanked 29 per cent. While, it has corrected 38 per cent from its 52-week high level of Rs 998.30 touched on October 20. 

Last month, the Reserve Bank of India (RBI) increased the risk weightage for unsecured loans to 125 per cent from 100 per cent for banks and NBFCs. Further, the central bank also increased the risk weight on bank loans to higher-rated NBFCs by 25 percentage points.

On December 6, in a presentation, Paytm announced that on back of recent macro development and regulatory guidance related to less than Rs 50,000 loans, in consultation with its lending partners, the company will reduce less than Rs 50,000 loans and expand to higher ticket loans segment.

The company said that this adjustment will result in a roughly 50 per cent decline in these disbursements, also known as postpaid loans. However, the company added that the impact on margins or revenue would be minimal.

Merchant loans, which are given to MSME as business loans, will continue to be a focus for Paytm. As these loans are given for business purposes to small merchants, they don’t get impacted by the recent regulatory guidance, the company said.

Paytm plans to focus on higher ticket size personal and merchant loans (Rs 3-7 lakh), as demand in these loan segment remains strong while risk remains well under control.

The company de-focus on postpaid (BNPL) and personal loans below Rs 50,000 to avoid any asset quality issues, given rising concerns in these segments.

Additionally, Paytm has moved away from some specific cohorts of customers in postpaid and will continue to carefully monitor risks and asset quality metrics in this segment. It further aims to widen the scope to other users once macro indicators improve.

Paytm mentioned that the scale-down in postpaid business is primarily prudential in nature and is to preempt any asset quality issues in coming quarters, Motilal Oswal Financial Services (MOFSL) said.

Asset quality metrics remain steady and the pick-up in high-ticket personal loans and merchant loans, along with the increase in the number of lending partners, should support steady growth in the medium term. While the longevity of these measures and the outlook in low-ticket unsecured loans remains under watch, the brokerage said. 

Currently, Paytm has 7 NBFC partners for loan distribution and are in the process of integrating 1 large Bank and 2 large NBFCs, which would be completed during Q4 FY 2024 and Q1 FY 2025, the company said.

It has now has 3 credit card partners and integration with one more bank is in process, with key focus on Rupay Credit cards.