India's Paytm tumbles on plan to curtail low-value personal loans

Paytm app is seen on a smartphone in this illustration taken, July 13, 2021. REUTERS/Dado Ruvic/Illustration/File Photo

BENGALURU (Reuters) -India's Paytm plunged as much as 20% on Thursday, its steepest decline since listing two years ago, as the digital payments firm plans to give out fewer low-value personal loans after the Reserve Bank of India (RBI) tightened rules on consumer lending.

The non-bank lender said on Wednesday it will go slow on sub-50,000-rupee (about $600) loans but expand its portfolio of high-ticket personal and commercial loans.

Giving out more high-ticket loans won't fully offset a scale back of smaller loans, Goldman Sachs analysts said. The analysts downgraded One 97 Communications, which owns and operates Paytm, to 'neutral' from 'buy' and cut their price target to 840 rupees from 1,250 rupees.

The company's net income will turn positive in fiscal year 2025-26, a year later than previously expected, due to slowing revenue growth, Goldman Sachs said.

Paytm expects a near 40%-50% drop in volume of loans it issues through post-paid product, but sees a minimal impact on revenue growth.

The moderation in loan disbursal is ahead of estimates, Jefferies said, trimming financial year 2024-2026 revenue estimate by 3%-10% and cutting the target to 1,050 rupees from 1,300 rupees.

Post-paid loans - which allow customers to pay back for purchases in installments, typically with no interest - made up over half of Paytm's total loans in July-September.

Its shares, last down 18% at 667.90 rupees, have gained 25% so far this year, outpacing the Nifty financial services index, which is up 10.7%.

Paytm has seven non-bank finance companies (NBFCs) as lending partners and plans to add one bank and two NBFC partners.

Aditya Birla Capital, whose unit is one of Paytm's partners, fell 7%.

"We are seeing signs of second order impact of RBI's recent regulatory tightening manifesting in the form of growth slowdown and increasing delinquencies in pockets of unsecured consumer loans," IIFL Securities analysts said.

(Reporting by Rama Venkat in Bengaluru; Editing by Mrigank Dhaniwala)

Follow us on our official WhatsApp channel for breaking news alerts and key updates!


Next In Tech News

Google says its AI image-generator would sometimes ‘overcompensate’ for diversity
Authorities troll LockBit boss on his commandeered Darkweb site
Meta’s Mark Zuckerberg seeks out of lawsuits blaming him for Instagram addiction
Canadian federal police says they were targeted by cyberattack
Intuitive Machines shares descend fast after the CEO says the moon lander is on its side
This week’s cellphone outage makes it clear: In the United States, landlines are languishing
EIA to temporarily suspend bitcoin miner survey after lawsuit -court document
Bezos, Nvidia join OpenAI in funding humanoid robot startup, Bloomberg reports
Julius Baer suffered IT crash last week
Nvidia hits $2 trillion valuation as AI frenzy grips Wall Street

Others Also Read