The stock market saw a significant downturn as Paytm shares plunged by 20% in early trade on Thursday, February 1, marking a tumultuous turn for the digital payment giant. This sharp decline came in the wake of regulatory action taken by the Reserve Bank of India (RBI) against Paytm Payments Bank, a subsidiary of Paytm.
The RBI's move to restrict Paytm Payments Bank from accepting deposits or top-ups in any customer account, prepaid instruments, wallets, and FASTags after February 29 has rattled investors and market sentiment alike. The central bank's decision follows a comprehensive system audit report and subsequent compliance validation report highlighting persistent non-compliances and material supervisory concerns within the bank.
Jefferies' target price is going down to Rs 500 per share, weighing in the reputational risks. "We cut EBITDA (ex-ESOP) by 46%/ 44% in FY25/26E led by a 7-10% cut to payments revenues and a 17-24% cut in lending revenues and compression in payments margins. Our sensitivity analysis shows that the impact of a 10% change in disbursements is low on revenues (2%), but high on Ebitda (15%). We adjust our DCF valuations to account for lower growth and margins. Our implied valuation multiple stands reduced by 30% to 15x FY26E EBITDA," Jefferies said, reported by Economic Times.