BENGALURU: After Paytm announced that it is scaling back small-ticket loans and restructuring its BNPL (buy now, pay later) business, shares of the company declined 20% on Thursday, and this is the largest drop since its listing.
Shares of One 97 Communications, parent company of Paytm, closed at Rs 660.70, down Rs 152.35 on Thursday. The company on Wednesday said it is recalibrating the portfolio origination of less than Rs 50,000 on the back of recent macro development and regulatory guidance. Under Rs 50,000 is the postpaid loan product of the company, and it will now be a smaller part of its loan distribution business.
“Paytm’s strategy to move away from small ticket size BNPL loans will affect the total loan originations via the platform as the segment forms over 50% of total disbursements,” said Motilal Oswal Financial Services in its report.
“Paytm believes that its sourcing funnel will be largely unaffected, as credit-worthy customers will be able to use the postpaid services. Take rates are expected to be marginally affected as BNPL as a product has lower take rates; however, a pick-up in higher ticket size personal loans should offset the overall impact,” Motilal Oswal said.
While the longevity of these measures and the outlook in low-ticket unsecured loans remains under watch, we trim FY24/FY25 disbursement estimates by 15%-18%, reflecting the current developments, it added. Several brokerages including Goldman Sachs, Jefferies and Morgan Stanley either downgraded Paytm stocks or cut their target price. Goldman downgraded Paytm to neutral and cut the 12-month target price to Rs 840. Jefferies cut to Rs 1,050 from Rs 1,300. Bernstein cut target to Rs 950 from Rs 1,100. Total value of loans disbursed by the company at the end of the second quarter stood at Rs 16,211 crore.
It indicated the monthly postpaid loan sourcing run rate to moderate by 50% from Rs 3,000 crore to Rs 1,500 crore. As a result, the total disbursement run rate is expected to decline to about Rs 4,500 crore per month from about Rs 6,000 crore per month.