One reason that Paytm may face headwinds is that 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 providing personal loans. In response to the regulator’s decision, Paytm said that it would reduce sub-50,000 rupee loan distribution. The company estimates that this decision will result i a 40%-50% drop in the volume of loans Paytm issues through its post-paid product. However, it says that the decrease will not significantly affect revenue growth.
That remains to be seen. Dolat Capital estimates that sub-50,000-rupee loans account for about 38% of Paytm's total loans, Dolat Capital. "We expect a negative impact of about 15% quarter-on-quarter on the (total) value of loans distributed by Paytm ... but revenue impact should be much less, at around 5% QoQ," Dolat financial analyst Rahul Jain told Reuters in December.
Yet some of the big global investment banks have a different opinion. After Paytm announced that it would issue fewer of those small loans, and offset the loss by focusing on bigger ticket loans to consumers and merchants, JPMorgan, Goldman Sachs and Citi revised their respective outlooks of the company to be less optimistic.
Another interesting development: Several heavyweight investors have either pared down their stakes in Paytm or sold them off completely in recent months. While Ant Group’s decision can be viewed through the lens of geopolitics, the same cannot be said for Berkshire Hathaway and SoftBank.
In late November, Berkshire Hathaway exited Paytm, selling its full stake in the company for about 13.7 billion rupees through a bulk deal. According to Tech Crunch, Warren Buffett’s company exited Paytm at a loss of about 40% on the investment it made in 2018.
Additionally, between Dec. 19 and Jan. 20, the Japanese conglomerate SoftBank Group offloaded another 2% in Paytm and now holds a 5.06% stake in the company, according to a January 24 exchange filing.