Following the RBI's warning, Jefferies downgrades Paytm to "underperform" and lowers its target price

Following the RBI's warning, Jefferies downgrades Paytm to "underperform" and lowers its target price

Following the RBI's warning, Jefferies downgrades Paytm to "underperform" and lowers its target price

Jefferies predicts that Paytm's EBITDA would be directly impacted by 20–30% after the RBI's decision on Paytm Payments Bank.

The revised price objective set by Jefferies for Paytm indicates that the stock might fall by more than 34%.

Jefferies, a brokerage company, reduced its rating for Paytm from 'Buy' to 'Underperform' and lowered its price objective for the shares by almost 50%, to Rs 500. This event occurs shortly after the company's lending operation was subject to significant limitations from the Reserve Bank of India. which also prohibits credit transactions and the acceptance of fresh deposits after February 29.

In light of the RBI move, Jefferies has raised its target price for Paytm, indicating a possible 34% decline in the stock. This is in anticipation of increased reputational concerns for the company.

According to Jefferies, the RBI's decision to prohibit Paytm Payments Bank is a result of ongoing non-compliance. In March of last year, the RBI had also prohibited Paytm Payments Bank from accepting new clients.

Additionally, according to Jefferies, the RBI move would directly affect Paytm's wallet and payments operations to the tune of 20–30% of its EBITDA. The brokerage believes that Paytm's EBITDA may be impacted by 20–25 percent due to the reputational effect on lending agreements.

The brokerage said that the loan business (which accounts for 20% of revenue) may be the primary victim of lending partners restricting transactions owing to operational or governance problems.

Due to this, Jefferies also reduced its Paytm EBITDA projection for FY24–2026 by 45%, which would further postpone the company's profitability.

The NSE price of Paytm's shares on February 1 stayed unchanged at Rs 761.20.