Will Paytm see ‘acche din’ anytime soon? Here’s why it seems unlikely

It doesn’t look like Indian digital payments company Paytm will see “acche din” (good times) anytime soon.

The beleaguered fintech company, which has seen its share price go down by more than 70% since its debut a few months ago, could see its counter fall further as the analyst who had earlier predicted its downfall, has again cut its price target to Rs 450 per share. This is significantly below the Rs 616 price at which Paytm is trading on Thursday. 

Macquarie Capital Securities (India) Pvt Ltd analyst Suresh Ganapathy has cited lower valuations for fintech companies globally as one of the key reasons behind his recommendation of a price cut. He has not, however, changed his revenue or earnings expectations for the company. 

Ganapathy’s latest recommendation comes as a double whammy for Paytm, after the Reserve Bank of India on Friday barred its Paytm Payments Bank from onboarding new customers. 

Ganapathy cited stricter compliance norms and regulations governing fintech companies as potential headwinds for Paytm. 

But what about other analysts?

While Ganapathy’s price target is abysmally low, a Bloomberg report said that the average 12-month price target for Paytm, among nine analysts, according to data compiled by it is Rs 1,203 per share. 

So, what has Macquarie exactly said?

Macquarie has said that in its view “recent developments significantly reduce the probability of (Paytm) getting banking licence to lend”. It further says that other regulatory headwinds facing the company include “the digital payments paper potentially capping wallet charges and tougher BNPL and KYC regulations”.

Paytm’s blockbuster IPO had been touted by some as a symbol of India’s growing appeal as a destination for global capital, particularly for investors looking for alternatives to China.

Ahead of the listing, Macquarie analysts including Ganapathy initiated coverage with an underperform rating and a price target of Rs 1,200. The IPO was priced at Rs 2,150.

How have the markets reacted to the latest report?

The markets are clearly not impressed. As of 11:45 a.m. on Thursday, the counter was down 2.7% over its closing price on Wednesday. In fact, the shares had touched an all-time low of Rs 572 apiece on Wednesday, before recovering to go past Rs 600 apiece.

Is Paytm the only recent IPO stock to have taken a tumble?

Not really. Numbers show that out of 60 stocks on the BSE IPO Index, 18 stocks have dropped between 40% and 65% from their highs since listing. About half of the stocks in the index have wiped out one-third of the investors' wealth. 

Some well-known stocks that are trading below their listing price include Zomato, Policybazaar and Nykaa.