Paytm share price tumbled over 4 per cent on Friday to hit an intraday low of Rs 782 apiece on NSE. The slump follows RBI’s move to issue strict norms for digital lending space. It also comes a day after the Advisory firm Institutional Investor Advisory Services India Limited (IiAS) flagged the proposal to reappoint Vijay Shekhar Sharma as the Chief Executive Officer (CEO) of Paytm for another five years and also opposed the remuneration decided for the position. The advisory firm advised shareholders to vote against the move, ahead of Paytm’s annual general meeting (AGM) on August 19. So far this year, Paytm shares have fallen over 40 per cent. However, analysts at ICICI Securities, Goldman Sachs remain bullish on the stock and see up to 55% upside going forward.
RBI Digital lending framework: Progressive, forward looking with no adverse implication on Paytm
Paytm parent One 97 Communications’ management team hosted a call this week to share their observations and assessment on business implication regarding the regulatory framework suggested by the RBI for digital lending. According to the management, the regulatory structure for digital lending is progressive and forward-looking allaying apprehensions of it being onerous on loan service providers (LSP). Also, the guidelines are in line with how Paytm is currently executing its business of financial services distribution. “The framework has no adverse revenue implication, business model change or additional disclosure requirement for the company. However, it will require operational changes for postpaid product,” said ICICI Securities.. However, the management indicated that the guidelines are implementable and executable.
No change in the revenue model for Paytm
ICICI Securities said in the report that there will be no change in the revenue model for Paytm due to the new regulatory framework as all charges are already transparently disclosed and paid directly to the lenders. “Convenience fee is paid by customers to lenders and lenders pay it back to LSPs as a part of distribution or collection revenue sharing. Paytm does not collect any charges directly from the borrowers. Also, MDR is paid by merchant to LSPs and the regulation does not have any bearing on MDR earned,” it said. The brokerage maintains a ‘buy’ rating on the Paytm stock with an unchanged target price of Rs 1,285 based on the customer lifetime value methodology.
RBI online lending guidelines remove key overhangs on the stock
Meanwhile, Goldman Sachs has also said that Paytm’s financial services business practices are in line with the key points, per the final guidelines issued by the RBI on digital lending. It believes that the guidelines should result in a limited-to-no impact on Paytm’s monetisation model and should help remove one of the key overhangs on the stock. “Regulations have remained a key focus area for Paytm investors, and recent developments such as digital lending guidelines, UPI through credit card, RBI’s payments vision document, etc. are largely neutral/positive for Paytm in our view. “Apart from this, on the regulatory front, removal of any overhang on MDR (merchant discount rate; timeline unclear) could be another catalyst,” it said. The foreign brokerage has a ‘buy’ rating on the stock with a target price of Rs 1,100 per share.
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