On Thursday 13th January 2022, Paytm Stock Price recorded a new 52-week low of Rs. 1,025. The stock fell by around 5% on the same day and is currently trading at a discount of more than 50% to the issue price. What are the reasons behind this fall in stock price and what should shareholders do. Get answers to these questions in this article as we move forward.
Possible Reasons for fall in Stock Price:
- The major reason behind the fall in the stock price is the negative reports from the Brokerage houses, where it is giving downside target to the stock price of Paytm.
- Macquarie has given the stock price target of Rs. 900 for Paytm and given ‘Underperform’ rating
- The rationale behind this downside target to Paytm Stock is because of the following reasons:
- Regulatory Changes: Paytm is a FinTech company and is a Payment bank, and hence there will be difficulties for the company to raise deposits.
- Rules and Regulations for Wallets: There is a possibility that many rules and regulations for wallets can be imposed by the regulatory authority, which would again raise some problems in raising money. To mitigate the issue of raising deposits, these FinTech companies are settling up with many tie-ups with the Banks, but ultimately Banks are traditional players, where Banks will be following their conventional methods, and will not take aggressive calls like FinTech companies.
- The slowdown in Merchant Loans: Earlier, Paytm was expecting some aggressiveness in merchant loans is now witnessing a slowdown, which is another negative thing for the company.
- Increasing Employee Cost: FinTech Companies and IT Companies are going through serious issues in retaining the existing talents and hiring new minds. Hence, the cost of retention and acquiring is increasing for such companies, which is leading to a rise in employee costs of the company.
What Should Shareholders Do?
The company is having a strong Gross Merchandise Value (GMV), but the company itself does not expect any break-even until FY25-FY26 in its business. Hence until then, the company is expected to suffer several hiccups like this. Hence, at this point, a very aggressive investor can only look for this counter that too with a very cautious assessment of the business, growth prospects, and other attributes.