One97 Communications Limited, the parent company of Paytm, saw its shares hit a 5% lower circuit during early trading on Wednesday, falling from INR 427.5 to INR 406.15. Foreign brokerage UBS has also reduced Paytm's target price from INR 650 to INR 510.
Market Reaction and Analysts' Views
The stock's decline is attributed to UBS analysts' expectations of increased marketing spend by Paytm to regain lost customers, leading to higher EBITDA losses in FY25. UBS anticipates a near-term financial impact on Paytm's business, with a permanent loss of market share in the payments industry, estimating a 5-7 percentage point decrease from its current 25% share.
Recent Developments
The downward trend in Paytm's stock follows Vijay Shekhar Sharma's resignation as part-time non-executive chairman and board member of Paytm Payments Bank. This change in leadership was announced on Monday, with a newly reconstituted board now overseeing the company's affairs.
Despite a 5% surge on Tuesday, Paytm's shares closed in the red. The stock has faced challenges since January 31 when the RBI imposed restrictions on Paytm Payments Bank, including prohibiting deposits, credit transactions, and UPI facilities after February 29.
Looking Ahead
With the RBI setting a deadline of March 15 for Paytm Payments Bank to cease all deposits, credit transactions, and top-ups, uncertainty surrounds Paytm's future performance in the stock market.
