Recent Movement: Paytm’s share price increased by 2.5% after a 19% fall in the previous session.

The stock has been volatile, with a significant drop of 70% from its IPO price. However, it showed a strong recovery, gaining 80% between March and October 2023.

Business Model Shifts:

 • Initial Success: Paytm’s initial rise was attributed to its new business model focusing on small ticket loans through the Buy Now Pay Later (BNPL) scheme.
 • Strategic Change: Due to the Reserve Bank of India’s (RBI) tightening of regulations on unsecured loans, Paytm decided to scale back its distribution of small-ticket ‘postpaid’ loans, affecting 55% of its quarterly disbursements.

Financial Metrics:

 • Revenue Growth: Despite regulatory challenges, Paytm’s revenues nearly tripled in two years (2020-21 to 2022-23), with a significant rise in its take rate.
 • Loan Distribution: Approximately 70% of Paytm’s personal loans were below the ₹50,000 threshold.

Regulatory Impact and Company Response:

 • RBI Regulations: In response to RBI’s increased scrutiny, Paytm plans to reduce its exposure in the small-ticket loan category by 40-50%.
 • New Focus: The company is now prioritizing higher-ticket personal and merchant loans, targeting lower-risk, credit-worthy customers.

Market Analysis and Brokerage Views:

 • Stock Downgrades: Following these developments, several brokerage firms reduced their target prices on Paytm stock.
 • Goldman Sachs downgraded from ‘buy’ to ‘neutral’, with a new target price of ₹840.
 • Jefferies maintained a ‘buy’ rating but lowered the target price to ₹1,050.
 • Bernstein set a new target price of ₹950.
 • Analysts’ Perspective: Despite the downgrades, many analysts still see value in Paytm stock at current levels, suggesting it as a viable buy or hold option.

Conclusion:

 • Paytm’s stock has faced challenges due to regulatory changes and shifts in its business model. While it has seen significant volatility, analysts remain cautiously optimistic about its potential, recommending it as a buy or hold despite recent downgrades. The company’s pivot towards larger loans and partnership with major banks and NBFCs could be key to its future growth and stability in the market.