Paytm is posing as a payments player and pushing income from lending as their major revenue going forward. It is in lending yet it does not do the underwriting or is taking the responsibility of default. It is an originator rather than a lender and income is bound to be limited. They are definitely not the largest in Fintechs in personal loan (not even in top 5) and to clarify to a previous post they cannot use customer deposit to lend forward.
ECL of 5% is not top notch. Major part of the lending was Postpaid loans and that will vanish from next quarter. With not being in the good books of the regulators, will push away the lending partners. Anyway they will be pushed to a corner and find difficult to lend, but they have already stopped lending for two weeks and that will stretch further. Any discontinuity in lending is only going to push the NPAs even higher irrespective of what kind of customers they have lent to. It is quite surprising that the lender partners have not yet started feeling the impact of this massive tremor and some are even 10% up today.
Would point out the cryptocurrency situation back in 2017-18. When the regulator was not happy with the growth they killed it by directing banks to not partner with the crypto platforms and we all know what has happened after that. Here the regulator not approving the payments bank passes the signal to the lender partners of their view and that is going to deter any lender from associating. UPI services will be routed most probably with ICICI and that will continue. The services that have been stopped (deposit, fast tag, UPI etc) will in some way find a revival. However, the services that the regulator has not touched (lending) directly is going to suffer the most. Lets see if they are able to salvage through any partnerships.
As pointed out earlier it is going to hit lower circuit for few sessions. Revision of lower circuit may halt the slide for sometime, but market will definitely read between the lines. Salvaging the company is going to be a mammoth task and would require a lot of help from partners and regulator. The help from regulator is definitely not coming and they have given their opinion to the lenders through their notice to PPBL.
Turnaround stories still happen in the investing world but it requires a sincere, hard working and clean management. For now will just say falling knives are not supposed to be caught, it only cuts your hands. Rest, happy to be proven wrong solely for the sake of the huge workforce employed by Paytm.
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