Despite Loan Disbursements Jumping 296% YoY and Growing User Base, Paytm Shares Drop

Paytm Shares Today: Even while the company's loan distribution business (in conjunction with leading lenders) continues to experience accelerated growth, with disbursements through our platform now having an annualized run rate of over Rs 25,000 crore in July, Paytm shares were trading lower in early trade on Friday.

According to the firm, consumer engagement is at its peak on the Paytm Super-App, which had an average monthly transacting user (MTU) count of 77.6 million in July 2022, an increase of 41% year over year.

The company's merchant payment volumes (GMV) for the month increased by 82% year over year to Rs1.06 lakh crore ($13 billion).

One 97 Communications was trading at Rs 780 at about 10:35 a.m., down 5.51 percent from its previous BSE closing price of Rs 825.50. The stock achieved an intraday high and low of Rs. 820 and Rs. 775, respectively, after opening at Rs.

The announcement also comes a day after Institutional Investor Advisory Services India Limited (IiAS) warned the plan to re-appoint Vijay Shekhar Sharma as the Chief Executive Officer (CEO) of Paytm for another five years and voiced opposition to the compensation set for the post. Before Paytm's annual general meeting (AGM) on August 19, the consultancy company recommended shareholders vote against the decision.

What Should Investors Do?

The new regulatory framework, according to ICICI Securities, won't cause a change in Paytm's business model because all fees are currently openly stated and paid directly to lenders. Customers pay lenders a convenience fee, and lenders then reimburse LSPs as part of a revenue-sharing arrangement for distribution or collection. Paytm does not get payment from borrowers directly. Additionally, MDR is paid by merchants to LSPs, and the law has no impact on MDR earned, it was stated. Based on the client lifetime value methodology, the brokerage keeps its "buy" rating on the Paytm stock with an unchanged target price of Rs 1,285.

In the meantime, according to Goldman Sachs, Paytm's financial services business procedures adhere to the major principles outlined in the RBI's final recommendations on digital lending. It thinks the rules should have little to no effect on Paytm's monetization strategy and should assist remove one of the main risks to the company. "Regulations continue to be a major topic of focus for Paytm investors, annualized and recent events like RBI's payments strategy paper, UPI through credit card, digital lending standards, etc. are mostly neutral or beneficial for Paytm in our opinion. In addition, it stated that the regulatory front's elimination of any restrictions on MDR (merchant discount rate; timing is unclear) "may be another stimulus." The stock gets a "buy" rating from the international brokerage, with a target price of Rs 1,100 per share.

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