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Bhavesh Gupta, president and COO of Paytm, explained in a conference call that the company plans to scale down the Rs 50,000 portfolio, primarily the postpaid, in a calibrated manner. Although postpaid loans will still be available, they will be targeted at specific customer segments for cross-selling higher-ticket products. Gupta emphasized significant reduction in the growth of Postpaid loans and the company's expedited expansion into high-ticket product portfolios in light of macroeconomic and regulatory guidance.
During the second quarter, Paytm disbursed loans valued at Rs 16,211 crore, reflecting a 9% sequential increase. Notably, in November, 70-73% of postpaid loans were below the Rs 50,000 mark. Low-value loans constituted 3-5% of Paytm's personal loan product and 4-6% of the company's merchant loans.
The Reserve Bank of India tightened rules on consumer lending in October due to an increase in small loans below Rs 50,000 and higher loan defaults. As a result, lenders now need to keep more capital for these loans, making them more expensive to offer. This has created challenges for lending below Rs 50,000.
Gupta mentioned in the investor call that the company's shift in focus would likely decrease monthly loan disbursals, primarily impacting the postpaid product due to its short duration. However, this is not anticipated to have a significant impact on earnings. Monthly loan disbursements are projected to decline from Rs 6,000 crore to Rs 4,500 crore. Gupta noted that the company was disbursing these loans for Aditya Birla Finance and Sumitomo Mitsui, which acquired Fullerton India Finance.
A foreign broker has revised Paytm's rating from "buy" to "neutral" and substantially reduced its price target from Rs 1,250 to Rs 840. Additionally, another foreign broker has lowered its price target for Paytm shares from Rs 1,050 to Rs 1,300, while yet another has reduced its price target from Rs 1,100 to Rs 950. These rating revisions, combined with consumer sentiment, seem to have significantly impacted Paytm's stock, leading to a 20% decline early today.
One 97 Communications is the digital financial services firm which operates under the Paytm brand. Paytm is India's payment super app offering consumers and merchants comprehensive payment services.
On a consolidated basis, the company reported a net loss of Rs 291.7 crore in Q2 FY24 as against a net loss of Rs 571.5 crore posted in Q2 FY23. Revenue from operations jumped 31.59% to Rs 2,518.6 crore in the quarter ended 30 September 2023 from Rs 1,914 crore recorded in the same period last year. The growth in the revenue was driven by increase in merchant subscription revenues, increase in GMV and growth in disbursements of loans through our platform.
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