Paytm stock plunges 20% as it announces non-issuance of loans below ₹50,000

Indian financial services giant Paytm witnessed a sharp decline of 20% in its stock price on Thursday, triggering concerns among fintech investors. The drop followed Paytm’s announcement of plans to reduce the issuance of personal loans under ₹50,000. This shift is a response to recent regulatory tightening by the Reserve Bank of India (RBI) and a move towards more conservative lending practices.

Shares of Paytm, trading at ₹812 on Wednesday afternoon, plummeted to ₹650, marking a significant market cap loss of $1.1 billion. The stock did recover slightly but closed with an 18.69% loss at ₹661.30. This downturn adds to a challenging month for Paytm, with its share price declining by 24.4% in December.

Paytm’s decision to curtail low-value personal loans aligns with recent actions by the RBI, which raised concerns about the risks associated with small personal loans. The central bank implemented tighter norms for consumer loans, leading Paytm to reevaluate its lending strategy. These regulatory changes have implications not only for Paytm but for the broader fintech sector.

In response to the regulatory environment, Paytm announced a shift toward a more conservative lending approach. The company plans to focus on higher-ticket personal and commercial loans targeted at lower-risk, high credit-worthy customers. This move is in line with the company’s commitment to maintaining a healthy loan portfolio.

Financial analysts have responded to Paytm’s strategic shift with mixed sentiments. Jefferies analysts noted the growing conservatism in the financial system, while Goldman Sachs downgraded Paytm from a buy to neutral. The latter firm also adjusted its revenue and EBITDA estimates for FY24 through FY26, anticipating a decline in disbursal growth.


Read Also