Paytm stock plunges 20% after downgrades by brokerages

Mumbai: Shares of One97 Communications, the parent of digital payments firm Paytm, plunged 20% Thursday - the lowest tradable limit of the day - even as analysts downgraded the stock after the Reserve Bank of India directed subsidiary Paytm Payments Bank to stop offering its key services after February 29.

The stock closed at ₹608.80 on the BSE on Thursday.

The RBI's punitive measures will have a significant impact on Paytm's business performance, said Motilal Oswal Financial Services, which slashing its price target on the stock to ₹575.


"We, thus, remain watchful of Paytm's business model and its ability to navigate through this highly uncertain regulatory and macro environment," said the brokerage.

Analysts said RBI's decision has poured cold water on investor expectations of the company making a profit soon.

"Paytm does not have a visible path to profits as these restrictions will only widen its losses further," said AK Prabhakar, head of research at IDBI Capital. "We would recommend investors to avoid the stock at this point."

Paytm shares touched their 52-week low of ₹516 on February 1, 2023, after which they gained 93.5% to the yearly highs of ₹998.3 on October 20, 2023. Since then, the stock has dropped about 64% till Thursday.

Jefferies downgraded the stock from 'Buy' to 'Underperform' and cut its target price to ₹500, implying a decline of 21.8% from its Thursday closing price.

The brokerage also cut its FY25-26 Ebitda (earnings before interest tax depreciation amortisation) estimate for Paytm by 45%.

"RBI's actions directly impact the wallet business and profitability of merchant payments business, which can impact Ebitda by 20-30%," said Jefferies. "We see the impact being much larger due to reputational concerns around the group."

Brokerage Dolat Capital reduced its target price of the stock from ₹1,320 to ₹1,100, but maintained a 'Buy' recommendation.

"We remain upbeat on consumer engagement, merchant addition, and platform strength," said Rahul Jain, vice president - research at Dolat Capital Market in a note to clients.