[ad_1]
Macquarie significantly reduced its 12-month price target for One97 Communications Ltd., the parent company of digital payments company Paytm, citing increased regulatory scrutiny. Macquarie, which predicted Paytm’s crisis before the listing, lowered its target to 275 rupees ($3.3), the sharpest of any major brokerage.
Paytm, which ended Monday’s trading session at 419.85 Indian rupees, is in shock the repression of the Indian central bank. The Reserve Bank of India recently ordered Paytm to virtually shut down Paytm Payments Bank, an associate company of Paytm that processes all its transactions.
The analyst group, led by Suresh Ganpathy, wrote in a note on Tuesday that it believed Paytm would see a sharp reduction in revenue and that the regulatory crackdown poses a “serious risk of customer exodus”. At Rs 275, Paytm’s market capitalization would have fallen to around $2.1 billion.
“We have significantly reduced our revenues by reducing both revenues from payment and distribution activities (60 to 65% over FY25/26E). Moving customers from one payment bank to another bank account or moving associated merchant accounts to other bank accounts will require KYC (Know Your Customer) to be redone based on our channel checks with partners , indicating that migration before RBI’s February 29 deadline will be an uphill task. .”
Paytm – which makes most of its money through lending – will also likely face challenges retaining its lending partners, Macquarie added. “Our channel checks with some lending partners reveal that they are reviewing their relationship with PayTM, which could potentially result in lower revenue from lending activities in the event that partners reduce or terminate their relationship with PayTM. AB Capital, one of PayTM’s largest lending partners, has already reduced its BNPL exposure to PayTM from a maximum level of Rs 20 billion to Rs 6 billion currently and is expected to decline further in our view.
India’s central bank said last week it was taking surveillance measures and imposing trade restrictions only after “persistent non-compliance” with rules, his first comment after the crackdown on Paytm last week asked existential questions about the future of the leading financial services company.
Reserve Bank of India (RBI) Governor Shaktikanta Das said the central bank always engages bilaterally with regulated entities and urges them to take corrective measures. If the central bank takes action, “it will always be proportionate to the severity of the situation,” Das told a news briefing. “All our actions, as a responsible regulator, are in the best interest of systemic stability and the protection of the interests of depositors or clients,” he added.
[ad_2]