Paytm shares collapse to new low after Macquarie slashes target price by 25% | Today Headlines

Paytm shares collapse to new low after Macquarie slashes target price by 25%

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Shares of Paytm’s parent company One97 Communications hit a new low on Monday after Macquarie lowered its target price for the stock to Rs 900, from Rs 1,200. The brokerage kept its rating of “under -performance ”on Paytm, increasing its projected losses for the business from 16% to 27% in fiscal year 22-25 due to declining revenues and rising employee and software costs.

Paytm stock fell as much as three percent to an all-time low of Rs 1,195 on BSE.

Latest drop in Paytm shares is causing more trouble for investors after recently listed stocks fell to an all-time high last week. At its lowest, the share is available at a discount of 44.4% from its issue price of Rs 2,150.

Macquarie also revised his revenue CAGR estimate for Paytm to 23% for fiscal year 21-26E, from 26%, citing a drop in distribution and commerce / Cloud revenue. He lowered the price-to-sell multiple for Paytm to 11.5 times from 13.5 times.

After various business and earnings updates, Macquarie said, his revenue projections, especially on the distribution side, are under threat.

“We are roughly reducing revenue estimates for FY 21-26E by an average of 10% each year due to declining distribution and commerce / cloud revenue partially offset by higher payment revenue. he said, adding that several regulatory and business-specific challenges exist for the company.

The brokerage said the Paytm stock is trading at 17 times its FY23E sales, which is expensive.

Here are some highlights of what Macquarie said:

  • RBI’s proposed digital payments regulation could cap wallet fees
  • Payments business accounts for 70 percent of Paytm’s overall gross revenue, any regulations capping fees could have a significant impact on revenue
  • Paytm’s foray into insurance was recently rejected by insurance regulator IRDA; this could have an impact on his chances of obtaining a banking license
  • Senior management attrition is another cause for concern that could impact business
  • Paytm’s average ticket size for disbursed loans has steadily declined over the past 12 months and sits at levels below 5,000 rupees. “At this size, we don’t think he gives a lot of merchant loans and most of the loans are low value BNPL (buy now-pay later) loans. Therefore, the possible distribution costs that they will realize are likely to be much lower. than our previous estimates, ”Macquarie said.

    In November, One97 Communications shares were listed on the stock exchange at a discount of around nine percent from the issue price. Its initial public offering was subscribed to at a 1.9 times the proposed actions.

    One97 Communications reported a net loss of Rs 473 crore for the second quarter of fiscal 22, up 8.5% year-on-year, although its operating income rose 63.6% to reach Rs 1,086.4 crore.

    (Edited by : Akanksha Upadhyay)

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    Paytm shares collapse to new low after Macquarie slashes target price by 25%

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