Shares of Paytm’s parent company One97 Communications fell more than 2 percent to a 52-week low. Macquarie Securities India said that the company’s future earnings growth could be worse than earlier estimates, after which its shares saw a strong fall today.
Today i.e. on January 10, the stock fell to Rs 1,201.25 on the National Stock Exchange.
The brokerage firm cut its target for the stock by 25 per cent to Rs 900 from Rs 1,200 earlier, which means it may see a further 28 per cent fall from the January 7 closing price. Macquarie maintained its ‘underperform’ rating on the stock.
Macquarie downgraded the rating for the company as the stock has fallen over 38 per cent from its high of Rs 1,955 on November 18, leading to a further disappointing performance on Dalal Street.
“Following various business updates and results, we believe earnings estimates may remain low, especially on distribution,” Macquarie said in a note.
The brokerage cut Paytm’s earnings by an average of 10 per cent per annum till 2025-26 due to lower distribution and cloud revenue. Macquarie estimates Paytm’s earnings to grow at 23 per cent over the next five years, compared to 26 per cent earlier.
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The brokerage firm said the Reserve Bank of India’s latest proposal to levy charges on digital payments could impact the company’s earnings. Simultaneously, the recent rejection of Paytm’s application for insurance broking and the challenges faced by it in clearing regulatory hurdles also add to its risks.
“Senior officials are resigning from Paytm, which is a cause for concern and we think their resignation could affect business,” Macquarie said.
Macquarie added, “At this point of time, we do not think it is dealing in multiple merchant loans, rather most of its loans are small-value BNPL (Buy Now Pay Later) type loans. So the distribution fees they will ultimately receive is likely to be much lower than our earlier estimates. ,
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