Paytm Faces Target Price Reductions Following RBI Directive: Can the Company Sustain its Business Model?

Paytm, the leading Indian digital payments and e-commerce platform, has experienced a significant blow to its target prices after the Reserve Bank of India (RBI) imposed restrictions on its subsidiary, Paytm Payments Bank (PPB). Foreign brokerages, including CLSA, Morgan Stanley, Jefferies, and Bernstein, have slashed their target prices for Paytm by 20-60 percent. This article delves into the impact of the RBI directive on Paytm’s business model and explores the concerns raised by various brokerages.

The Impact of the RBI Directive on Paytm’s Target Prices

Following the RBI’s directive on Paytm Payments Bank, foreign brokerages have significantly reduced their target prices for Paytm. CLSA, Morgan Stanley, Jefferies, and Bernstein have all slashed their target prices by 20-60 percent. The largest reduction comes from Macquarie, which now holds a bearish view on the company.

Assessing the Impact on Paytm’s Lending Business

While the restrictions on Paytm Payments Bank do not directly affect Paytm’s lending business, brokerages hold differing opinions on the matter. Some argue that a massive customer exodus could impact loan distribution, while others believe the impact will be limited to Paytm’s wallets business.

Divergent Views among Brokerages

Brokerages are divided in their assessment of the impact of the RBI directive on Paytm. Macquarie’s recent downgrade, from an “outperform” rating to “underperform,” reflects concerns over reputational issues faced by Paytm. On the other hand, Dolat Capital Markets maintains an optimistic outlook, highlighting the company’s proactive risk mitigation measures.

Macquarie’s Downgrade and Reputational Concerns

Macquarie’s channel checks reveal that some lending partners of Paytm are reconsidering their relationship with the company due to reputational concerns. This led Macquarie to give an “underperform” rating to Paytm, with a significant reduction in target price.

Dolat Capital Markets’ Optimistic Outlook

Contrary to Macquarie, Dolat Capital Markets acknowledges potential risks from the RBI directive but believes that Paytm has already factored in worst-case scenarios. The firm predicts significant volatility in Paytm’s financial performance in the short term but remains positive about its long-term prospects.

Jefferies’ Projection of Direct and Reputational Impact

Jefferies estimates that the RBI’s action will have a direct impact of 20-30 percent on Paytm’s wallets and payments business. Additionally, the brokerage foresees a reputational impact on lending partnerships, potentially leading to a 20-25 percent toll on Paytm’s earnings.

Stock Price Decline and Market Volatility

Paytm’s stock price has declined by over 50 percent in the past two weeks in response to the target price reductions. The market is likely to experience volatility as investors gauge the long-term implications of the RBI directive on Paytm’s performance.


  1. Will the RBI directive have a lasting impact on Paytm’s business model?
    • The impact is uncertain, with varying opinions among brokerages. Paytm’s proactive risk mitigation measures may help navigate the challenges.
  2. How will the target price reductions affect Paytm’s financial performance?
    • The reductions indicate market skepticism and may lead to short-term volatility. However, Paytm’s ability to adapt and innovate could determine its long-term success.
  3. Are there concerns about Paytm’s lending partnerships?
    • Macquarie’s downgrade highlights concerns over reputational issues affecting lending partnerships. However, other brokerages believe the impact will be limited to the wallets business.
  4. What is the outlook for Paytm’s stock price?
    • The recent decline in stock price reflects investor sentiment following the target price reductions. Market volatility is expected as investors assess the long-term implications.
  5. How has Paytm responded to the RBI directive?
    • Paytm has implemented proactive measures to mitigate risks and has already factored in potential worst-case scenarios. This demonstrates its commitment to sustaining its business model.

In conclusion, Paytm is facing significant target price reductions following the RBI directive on its subsidiary, Paytm Payments Bank. The impact on Paytm’s lending business and wallets business is still uncertain, with divergent views among brokerages. Despite the challenges, Paytm’s proactive risk mitigation measures and ability to adapt may determine its ability to sustain its business model in the long run.

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