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Paytm Falls to a Record Low and Macquarie Sees Jio Finance as a Threat

On Tuesday, shares of One 97 Communications, which operates the digital wallet Paytm, fell to an all-time low after analysts labeled the upstart Jio Financial Services (JFS) as a potential threat to the payments services provider.

Paytm shares fell more than 10% on the BSE to a low of Rs 476.65. The stock has been on a downward trend for some time, which was accelerated by Softbank’s share dumping last week. The stock has dropped by 23% in the last week.

Reliance Industries (RIL) recently announced the demerger of its financial services business, which will be renamed Jio Financial Services. According to a Macquarie analyst, the company could be the fifth-largest financial services company in India in terms of net worth, after the HDFC twins, SBI, ICICI Bank, and Axis Bank.

Analyst at Macquarie Capital Securities Suresh Ganapathy said, “It’s too early to know the exact customer segments and target markets that Jio Financial plans to serve, but it seems clear that it will focus on consumer and merchant lending, which is the mainstay of NBFCs like Bajaj Finance and fintech like Paytm” (India).

Heavy Supply

Aside from this, a lot of shares being sold by institutional investors is also a drag. At an average price of Rs 555.67 per share, SVF India Holdings (Cayman) sold 2.93 crore shares of Paytm. This is worth Rs 1,630.89 crore. As of September 2022, SVF owned 11.32 crore shares of Paytm, which was 17.45 percent of the company. It wants to get rid of more of its shares.

Last week, BofA Securities Europe SA bought 50.26 lakh shares in the company that runs Paytm, Morgan Stanley Asia Singapore PTE bought 60.03 lakh shares, and Societe Generale – ODI bought 70.85 lakh shares on the open market. They bought these shares for an average of Rs 555 per share, which made the total amount they paid Rs 1,005 crore.

Mixed Analysts

Even though the stock price has gone down, analysts have different opinions about it. Sumeet Kariwala, an Equity Analyst at Morgan Stanley, has a target price of Rs 785 for Paytm, which he calls “equal weight.” Yes Securities has a rating of “neutral” as well.

Citi Research has raised the stock’s target price to Rs 1,055. JP Morgan is also “overweight” because it thinks the business has a good chance of breaking even. Its goal price has gone up from Rs 1,000 to Rs 1,100.

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