Shares of One97 Communications, the parent company of Paytm, faced a significant decline in the stock market, dropping by 20% to ₹650.45. This happened after Paytm announced a change in its strategy, deciding to reduce the number of small ticket loans it offers. This is a big deal for Paytm because these smaller loans made up more than half of all the loans they gave out. Paytm’s decision comes after some new rules and advice from regulators. They talked with their lending partners and decided to focus on larger loans, which are more than ₹50,000.
This shift is part of Paytm’s plan to ensure they have a healthy and strong portfolio of loans. Despite this change, Paytm is still keen on giving loans to small merchants, as these are not affected by the new rules. They are now looking to give bigger personal and business loans to customers who are less risky and have a good credit history. They’re working with big banks and financial companies to do this. Paytm believes this new focus will help their loan business grow.
They are committed to keeping a good quality of loans and following all rules and risk measures. However, because of this strategy change, several brokerage firms have changed their views on Paytm’s stock. For example, Goldman Sachs changed its rating from ‘buy’ to ‘neutral’ and lowered its target price. But, Motilal Oswal kept its ‘buy’ rating, with a target price a bit lower than before. Motilal Oswal noted that Paytm is being cautious with its smaller postpaid and personal loans to avoid any problems with loan quality. They are carefully choosing who to give these loans to and are planning to expand their customer base in the future when things look more stable economically. As of the latest update, Paytm’s stock was trading at ₹659.50, which is 18.88% lower than before.