Paytm Crashes 20% On Loan Biz Decision; Biggest Decline Since Its Listing 2 Years Ago

Shares of Paytm on Thursday plunged as much as 20 per cent, its steepest decline since listing two years ago. The crash comes after the digital payments company decided to give out fewer low-value personal loans after the RBI’s tightened rules on consumer lending.

Paytm on Wednesday said it will go slow on loans below Rs 50,000. However, it said it will expand its portfolio of high-ticket personal and commercial loans.

On the BSE, the shares of One97 Communications, the parent firm of Paytm, on Thursday opened 8.4 per cent lower. After recovering a bit, up to Rs 744 per share, the shares started a downward trend and touched a low of Rs 650.65 at around 10:45 am, which was 19.99 per cent lower than the previous close of Rs 813.3 per share.

As of 12:01 pm, Paytm’s shares were trading at Rs 663.85, which is Rs 149.45 or 18.38 per cent lower than its previous closing.

In November, the Reserve Bank of India tightened norms related to unsecured lending portfolios of commercial banks and non-banking financial companies (NBFCs). It raised risk weight by 25 per cent on consumer credit exposure of banks and NBFCs.

It tightened consumer lending rules after a surge in small-ticket loans, particularly of those less than Rs 50,000, and an increase in delinquencies.

Rating Downgrades On Paytm

Meanwhile, Goldman Sachs on Thursday also downgraded One97 Communications, which owns and operates Paytm, to ‘neutral’ from ‘buy’ and lowered the price target to 840 rupees from Rs 1,250.

Paytm’s plan to give out more higher ticket loans is not expected to fully offset a scale back of smaller-ticket loans, analysts at the brokerage said in a note.

The company’s lending growth, a core driver of its profitability, is expected to decelerate, while payments, commerce and cloud momentum would remain strong, the Goldman Sachs analysts said.

Paytm’s net income is now expected to turn positive in fiscal year 2025-26, a year later than previously expected, owing to slow revenue growth, Goldman Sachs said.

While some moderation in Paytm’s loan disbursals following the central bank’s measures was expected, “the quantum is ahead of our estimates,” Jefferies said, while trimming the company’s financial year 2024-2026 revenue estimate by 3-10 per cent and cutting its price target to Rs 1,050 from Rs 1,300.

Paytm’s so-called post-paid loans made up over half of the total loans issues in July-September.