Paytm’s stock plunges 9% following Macquarie’s downgrade, reducing target price to Rs 275

Today, Paytm’s stock dropped as much as 8.7% to a low of Rs 385.75 on the BSE. This decline followed a downgrade from global brokerage firm Macquarie, which shifted its rating for the troubled fintech company from neutral to underperform. Additionally, they lowered the target price to Rs 275, citing concerns about the risk of customer exodus and its impact on Paytm’s monetization and business model under Vijay Shekhar Sharma’s leadership.

The stock faced pressure following the RBI’s decision to restrict certain operations of Paytm Payments Bank due to findings from a system audit and compliance validation report by external auditors.

Recent events prompted multiple brokerages to revise their stance on the company, resulting in downgrades. Macquarie, a global brokerage, downgraded the stock to ‘Underperform’ in a recent report and slashed its target price from ₹650 to ₹275 per share, citing significant revenue declines across multiple segments.

Following recent regulatory changes, Paytm is now at risk of losing a significant number of its customers, including 330 million overall customers and 110 million monthly transacting users, along with its merchant subscription network of 10.6 million. This poses a serious threat to both its revenue generation and business model,” the brokerage explained.

Due to these concerns, Macquarie has substantially reduced revenue projections, especially in the payments and distribution segments, predicting a decline of 60-65% over fiscal years 2025 and 2026.

Transferring payment bank customers or related merchant accounts to another bank will necessitate re-doing KYC (know your customer) procedures, based on our discussions with partners, indicating that meeting the RBI’s February 29th deadline for migration will be a challenging task,” the brokerage added.

AB Capital, Paytm’s key lending partner, has substantially cut its involvement in Paytm’s Buy Now, Pay Later (BNPL) services. From a peak of ₹20 billion, AB Capital’s exposure has dropped to ₹6 billion, with expectations for further reduction.

Macquarie’s View on Paytm

The brokerage lowered Paytm’s rating to ‘underperform’ and slashed its target price to Rs 275 from Rs 650, indicating a 34.9% decline from Monday’s closing price, citing significant revenue decreases in multiple segments.

The brokerage cited recent company incidents as the reason for the downgrade, fearing potential customer loss that could significantly impact its revenue and business model.

 Additionally, transferring payment bank and merchant accounts to other banks necessitates re-doing KYC, posing challenges within RBI’s February 29 deadline.

AB Capital, a major lending partner, has scaled back its exposure to Paytm, and Paytm’s income is expected to drop by 60-65% from FY25 to FY26, with deficits possibly increasing by 170% and 40% during the same period, according to the report.

What’s the latest at Paytm?

RBI instructs Paytm Payments Bank Ltd. to halt new deposits, credit transactions, and toll payments via prepaid instruments, wallets, or cards from February 29.

 Existing Paytm wallet funds can be used until depleted, but no further additions are allowed after that date. If RBI persists, top-ups for the Paytm wallet will cease, rendering transactions impossible.

Paytm stock performance: Historical trend

In the past year, Paytm shares have declined by over 39%, trailing behind the Nifty 50’s gain of 22%.

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