Paytm crisis: Brokerage firm Macquarie downgrades Paytm to underperform; cuts target price to Rs 275

Paytm Crisis: Amid the ongoing regulatory compliance crisis, Brokerage firm Macquarie has downgraded Paytm to Underperform. The brokerage has also cut the fintech's target price from Rs 650 to Rs 275.

Macquarie on Paytm

Macquarie listed out customer exodus as a significant risk that can jeopardise monetisation as well as Paytm's business model. The brokerage has further estimated loss by 170% in FY25 and 40% in FY26, factoring 60-65% decline in revenues.

Also Read: Paytm crisis: No room for review of action taken against Paytm Payments Bank, says RBI Governor

Macquarie also assumes, a 50% cash burn rate and a 20x P/E multiple to normalise earnings from distribution business. Cash burn rate measures how quickly a company spends its cash reserves over a specific period. Meanwhile P/E is calculated by dividing the market value price per share by the company's earnings per share. A high P/E ratio can mean that a stock's price is high relative to earnings and possibly overvalued.

While predicting that the lending partners might re-look their relationships with Paytm, the brokerage firm also noted that transitioning to new banks looks difficult.

Paytm Crisis

On Monday, RBI governor Shaktikanta Das said that there is no reveiw of the action taken against Paytm and the decision was taken after serious consideration and deliberation.

The RBI, earlier this month, ordered Paytm Payments Bank Ltd - a restricted bank that can take deposits but cannot lend - to not take any further deposits or conduct credit transactions or carry out top-ups on any customers accounts, prepaid instruments, wallets, and cards for paying road tolls after February 29.