Paytm shares succumb to selling pressure again as Goldman lowers target price

The four-day-long non-stop 5% upper circuits in troubled fintech Paytm today came to a halt on Thursday after another Paytm bull slashed the target price. While maintaining a neutral rating on Paytm, Goldman Sachs lowered the target price to Rs 450 from Rs 860 earlier.

The global investment bank reduced FY24E-26E revenue/adjusted EBITDA estimates for Paytm by up to 36%/80% after which the implied value per share comes in the range of Rs 240 to Rs 750.

Admitting that there are still a number of unknowns, it expects FY25 revenues to decline 21% YoY vs 16% growth earlier.


Following the target price cut by Goldman, Paytm shares were trading 2.5% lower at Rs 385.90 on BSE. The counter is still down about 61% from its 52-week high of Rs 998.

Most analysts remain cautious on Paytm and suggest that retail investors should not try to catch a falling knife.

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The recent rally in Paytm shares came after RBI extended the ban by 15 days on Paytm Payments Bank's key banking/wallet operations, except for nodal accounts and ED found no FEMA violation. Paytm's new partnership with Axis Bank for nodal accounts is also expected to provide continuity of settlements for merchants and minimal disruption for its customers.

Jefferies, which has moved the stock to "Not Rated" category, wants to stay away from making a bet on Paytm till the regulatory clouds recede.

"In case of no incremental regulatory clampdown, there could be multiple scenarios for the business depending on user/merchant retention. We see positive and negative risks arising from user/merchant retention, revenue traction and cost-controls. On the basis of merchant/user attrition to the tune of 10-30% and a hit to net revenues (adj. for payments interchange) of 20-45%, valuation could vary widely," it said.

Bernstein, however, has maintained an outperform rating with a target price of Rs 600. The brokerage expects One 97 Communications to successfully execute the operational changes required to remove the dependency on PPBL with limited long-term impact to their overall business.

With the PPBL’s products such as wallets and Fastags set to drop, Bernstein estimates a 5% decline in payment GMV and the worst-case impact of 4 bps on the payments processing margin from 9 bps currently, if the economics for Paytm doesn't change significantly from switching to a non-PPBL partner.

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