Paytm share price: According to global research firm Macquarie, Paytm’s decision to rebalance its lending portfolio was a precautionary measure taken in consultation with its partners.
There was no deterioration in asset quality in the post-paid or personal loan segment, Macquarie said in a note. Paytm’s parent company, One 97 Communications, had previously decided to reduce its small-ticket loans.
Macquarie maintains its ‘Neutral’ rating on Paytm and maintains its target price of 900 per share on Paytm shares, representing nearly 46% potential upside from Monday’s closing price.
“Management indicated that it is a risk-averse call for post-paid loans based on stress observed in certain pockets of the system.” While the CoF for NBFC partners will rise due to higher risk weights for bank funding to NBFCs, the impact on products such as post-paid loans will be negligible due to the product’s short tenor (up to 30 days),” according to the research firm.
Paytm’s management indicated that increasing scale in large-ticket personal loans is feasible because certain customers were previously eligible for higher ticket-size loans, but with Paytm’s lending model limited to ticket sizes up to 0.3 million, the said customers would seek loans from other lenders.
Paytm share price is expected to surge by 46%.
Furthermore, customers who have primary deposit relationships with other banks use Paytm to obtain personal loans. Paytm sees this as an opportunity in the high-ticket (0.3-0.7mn) personal loan market, according to Macquarie.
Previously, the fintech behemoth increased ticket sizes for high-quality customers and had no concerns about asset quality.
This is evident, as the size of personal loan ticket sizes has nearly doubled in the last two years. In the last 4-5 months, the company began high-ticket personal loan lending, it added.
Paytm management expects merchants and customers to remain loyal to the service proposition in the payments space. Given the competition in the lending segment, Macquarie believes Paytm is targeting continued upselling to its high-quality customers, for which it has a data advantage.
Paytm has announced plans to expand its business to include higher-ticket personal and merchant loans. In collaboration with large banks and NBFCs, the company stated that these loans will be targeted at lower-risk and high-credit-worthiness customers.
During an analyst call, Paytm management stated that personal loans and merchant loans are still performing well, and that merchant loans are trending to perform even better.
