Paytm shares tank 20% after company looks to curtail low-value personal loans
Paytm, tanked 20% to the day's low of Rs 650.45 on the NSE in Thursday’s trade after the company informed exchanges that it will issue fewer sub-Rs 50,000 (about $600) personal loans weeks after the central bank tightened rules on consumer lending after a surge in demand.
The fintech lender said it will expand its portfolio of higher-ticket personal and commercial loans to lower-risk and high-credit-worthy customers, expecting «good demand» for loans of more than Rs 50,000.
This comes after the Reserve Bank of India (RBI) recently raised the amount of capital that banks and non-bank lenders need to set aside to cover potential defaults when giving out personal loans.
The RBI tightened its rules, after a surge in such small-ticket loans, particularly of those less than 50,000 rupees, and an increase in delinquencies.
Paytm is getting «ultra-conservative» in this segment, a Reuters report said, quoting Bhavesh Gupta, the company's president and chief operating officer, on a call with analysts.
«On the back of recent macro development and regulatory guidance, in consultation with our lending partners, we have decided to reduce less than Rs 50,000 loan distribution,» Gupta said.
This, he estimated, will lead to a near 40%-50% drop in the volume of loans Paytm issues through its post-paid product, but will have a minimal impact on revenue growth.
Paytm's postpaid loans accounted for about 56% of total loans in the July-September quarter, per company data.
The sub-50,000-rupee loans, in particular, account for about 38% of Paytm's total loans, estimated Rahul Jain, financial analyst at Dolat Capital.
«We expect a negative impact of about 15% quarter-on-quarter on the (total) value of loans distributed by Paytm… but
