New Delhi: The shares of One97 Communications, the parent company of Paytm, dropped 19 percent on Thursday. At the end of the day, the shares nosedived 18.74 percent to close at ₹660.70 on the National Stock Exchange. On the Bombay Stock Exchanges, the shares tumbled 18.69 per cent to end at ₹661.30 a piece.
The bloodbath was precipitated by the company’s announcement that it will go slow on loans less than ₹50000 and focus on high-ticket loans. The company said they would focus on the merchant side rather than the consumer side. “We will try to do a lot more there. Our focus now on the calibration of business is on high ticket, slowing down to less than ₹50,000,” Paytm’s President and Chief Operating Officer Bhavesh Gupta said on Wednesday.
The slump in the share prices erased over 1 billion dollar worth of market value. This is the biggest fall in share prices in two years for the Noida-based company.
After the company announced it will reduce loans below ₹50,000, at least five brokers including Goldman Sachs Group Inc., JPMorgan Chase & Co. and Citigroup Inc. downgraded its ratings, reported Bloomberg.
The Reserve Bank of India in November asked lenders to boost provisions against personal loans and credit card borrowings as these debts are unsecured. The move could hurt consumer spending.
Citigroup’s analysts wrote in a note that the move, which helps Paytm acquire customers, could affect the company’s medium-term growth potential”. It downgraded the stock to neutral from buy.
It also estimated a drop in Paytm’s operating profit to the tune of 20 percent for the 2024-2025 fiscal year. It also pointed out that nearly 75 percent of loans of Paytm were under ₹50,000.
With inputs from PTI, Bloomberg
