Paytm Shares Fall As Downgrades Are Triggered By A Plan To Reduce Small Loans

Analysts are concerned about Paytm’s plan to progressively lower the amount of unsecured loans under Rs 50,000.

After analysts downgraded the stock and the firm chose to gradually reduce the amount of unsecured loans under Rs 50,000, shares of One97 Communications Ltd., the parent company of Paytm, plunged to hit the 20% lower circuit.

“The portfolio of postpaid loans consists primarily of loans under Rs 50,000. Bhavesh Gupta, president and chief operating officer of Paytm, stated on a conference call on Wednesday, “We have decided to—in a calibrated manner—keep scaling the Rs 50,000 portfolio, especially the Postpaid loan, down on the back of the macro developments and regulatory guidance, which is there.”

In response to regulators and lending partners’ concerns about systemic risk, JP Morgan sharply moderated the distribution of its ticket loans, a move the company described as a “profit warning”.

The research group stated in a report that the corporation is predicting a 40–50% decline in low-ticket lending due to increased bottom-scaping of customers with lower limits and growing system-level concerns around low-ticket unsecured lending, “We assume a sustained slowdown in BNPL and even PL over FY24/25, and do not give credit on offsets via pick-up in Merchants loans/high tickets loans or any flexibility that Paytm may have on direct costs.”

The Reserve Bank of India tightened guidelines for unsecured retail loans in November, which prompted Paytm’s action. In response to mounting worries about risk, the central bank increased the cost of consumer lending for banks and non-bank lenders and requested that they reduce their exposure to these loans.


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