Paytm may face ‘tough times ahead’, stock brokers recommend to stay away from the stock

• Once again Macquarie has further reduced Paytm’s target price to ₹450.
• RBI’s recent curbs on the Paytm Payments Bank has triggered a share sell-off among investors.
• Stock brokers have recommended investors to stay away from Paytm’s stock at the moment.

Global investment bank Macquarie has further reduced financial payments firm Paytm’s target price to ₹450, citing “tough times ahead”.

Suresh Ganapathy, as associate director at Macquarie, in the report highlighted that Reserve Bank of India’s (RBI) recent curb on Paytm Payments Bank has reduced the company's chances of getting a small finance banking licence “thereby impeding its ability to lend”.

“Given this, and competition from other fintechs in the payments space, we remain skeptical about Paytm’s longer-term ability to generate free cash flow,” the Macquarie report read.

Any payments bank that completed five years of operations can opt for a small finance banking licence with the RBI. Since Paytm Payments Bank had commenced its operations on May 23, 2017, it will be eligible to apply for a licence by May-June this year.

This is the fourth time Macquarie has slash Paytm’s target price. It was previously set at ₹1,200 in November 2021, then reduced to ₹900 in January 2022 and then to ₹700 in February 2022. The continued dip in Paytm’s share price has provided Macquarie’s prediction to be correct.

Paytm’s shares were currently trading at ₹623 at 10:04 a.m., on March 17 morning. Paytm had raised capital at the valuation of $19.9 billion in its initial public offering (IPO) at an issue price of ₹2,150. Its current market capitalisation is ₹40,360 crore ($5.3 billion).

Even Indian stock brokers — like Manoj Dalmia of Proficient Equities, Ravi Singh of Share India, Anuj Gupta of IIFL Securities — expect Paytm to hit ₹500-₹550 mark soon.

Ravi Singh, vice president and head of research at Share India has advised investors to “exit the stock and wait for stability at lower levels for fresh entry”.

Likhita Chepa, senior research analyst at CapitalVia Global Research, too has advised investors to stay away from Paytm stock as there is no clarity as to when the company could be able to generate any profit. “It has been witnessed that the losses of the company have widened, and it seems like the company is unable to see its way back,” she added.

Disclaimer: The stock recommendations in the article are given by the respective stock brokers. Business Insider does not own any responsibility for investment advice.

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