Shares of Paytm, the Indian digital payments giant, fell over 2% on the Bombay Stock Exchange (BSE) today as financial stocks faced a broad sell-off. The market's negative reaction is partly due to the Reserve Bank of India's (RBI) decision to increase risk weights for unsecured retail loans, which analysts believe could curb loan growth for banks and indirectly affect fintech companies like Paytm.
The brokerage firm CLSA has pointed out that this new measure by the RBI might lead to a moderation in loan growth for banks, which could ripple through the financial ecosystem and impact fintech firms. Paytm, known for its wide array of digital finance products, could see changes in its business dynamics as a result.
Jefferies, another financial services company, provided a more nuanced view on the situation. It suggested that the impact on Paytm might be minimal since most of its Non-Banking Financial Company (NBFC) partners have a small portion of their lending in unsecured loans. Nonetheless, Jefferies did not dismiss the potential challenges entirely. It highlighted that higher funding costs and increased capital requirements could squeeze the profitability of Paytm's Buy Now Pay Later (BNPL) and personal loan (PL) offerings. This could lead to stricter credit standards or slower growth for these products.
Looking ahead, Jefferies anticipates a deceleration in consumer loan disbursal growth from an expected 90% in the fiscal year 2024 to 40% in fiscal year 2025 and 35% in fiscal year 2026. This slowdown is projected to affect lending revenues by 5-10% in fiscal years 2025 and 2026, potentially altering Paytm's path to profitability.
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