Paytm shares today fell up to 8.7% to day’s low at Rs 385.75 on BSE after global broking firm Macquarie downgraded the troubled fintech to underperform from neutral call with a reduced target price of Rs 275 saying that the Vijay Shekhar Sharma-led company is facing a serious risk of customer exodus which significantly jeopardises its monetisation and business model.

“We change our methodology from price/sales to fair value on normalised distribution business profits. We revise our target price to Rs 275 from Rs 650. Our valuation would have been Rs 225 under our earlier methodology,” said Macquarie’s Suresh Ganapathy.

The brokerage has increased its loss estimates by 170%/40% over FY25/26, factoring in a 60-65% decline in revenues due to lower payments and distribution revenues. It has also assumed a 50% cash burn rate and 20x PE multiple to normalised earnings from its distribution business.

“We cut revenues sharply as we reduce both payments and distribution business revenues (60-65% over FY25/26E). Moving payment bank customers to another bank accounts or moving related merchant accounts to other bank accounts will require KYC (Know your customer) to be done again based on our channel checks with partners, indicating that migration within RBI’s Feb 29th deadline will be an arduous task,” it said.

Channel checks with some lending partners reveal that they are re-looking at their relationship with the fintech which eventually could lead to a decline in lending business revenues in case partners scale down or terminate their relationship with Paytm.

“AB Capital, one of Paytm’s largest lending partners, has already pared down their BNPL exposure to Paytm from a peak level of Rs 20 billion to Rs 6 Billion currently and is expected to go down further in our view,” Ganapathy said.In the bull case scenario, the stock can rally up to Rs 540 by factoring in a 25% decline in distribution revenues (vs 60-65% in base case scenario). But in the bear case, the stock can crash as low as Rs 180 if the distribution revenues drop 75%, according to Macquarie.Following a ban imposed on Paytm Payments Bank, which also houses the Paytm wallet, Reserve Bank of India (RBI) Governor Shaktikanta Das has said that there is hardly any room to review the actions.

“When constructive engagement doesn’t work or when the regulated entity does not take effective action, we go for imposing business restrictions. Actions are proportionate to the gravity of the situation,” Das has said.

Paytm shares have lost about 50% of its value ever since the RBI ban on January 31st. Market experts have warned retail investors to avoid being on the buy side till the time Paytm is out of the woods as far as regulatory issues are concerned.

Global broking firm Bernstein has, however, advocated a buy the dip strategy while giving a target price of Rs 600.

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