Paytm shares down over 40% from all-time high! What should investors do now?

Shares of Paytm (listed as One 97 Communications) have been on a roller coaster ride since the company made its debut on Dalal Street and has tanked over 40 per cent from its all-time high of Rs 1,961.05.
 
Of late, the shares have been under tremendous selling pressure. The stock hit its all-time low of Rs 995 on Friday after the global brokerage firm Macquarie reduced its price target for the stock by 25 per cent to Rs 900 from the Rs 1,200 earlier. It expects regulatory headwinds as the “elephant in the room” for Paytm.
 
“The notion around Paytm’s growth and path to profitability seems skeptical among investors. The technical charts indicate a bearish zone in the short term,” Sonam Srivastava, Founder, Wright Research told BusinessToday.In.
 
“It must be noted that Paytm’s book value stands at 10.49 which is way above the average industry median. Also, it has a negative EPS of -24.07. However, the stock is not in an overbought zone, and for a company like Paytm anything below the price of Rs 1,200 seems like a good buy,” she added.
 
She noted that the steep fall in the price of Paytm’s share has a series of reasons. From non-satisfactory quarterly results to Macquaire, a brokerage firm, lowering Paytm’s target price to Rs 900 from Rs 1,200 and even weak global macro trends.
 
Srivastava said that for existing investors, it is advisable to offload a few shares and use the same to invest elsewhere in the market as the opportunity cost to hold Paytm for a short-term period seems disappointing.
 
For investors who want to invest for the long-term, Paytm at this price point is a good buy. In the next 20 months, the stock is on the trajectory to record 65 per cent returns from its current level, she said.
 
According to Divam Sharma, Founder, Green Portfolio, there are a lot of headwinds for the company from a regulatory point of view. Adding to the woes, the company has recently seen hurdles at the senior level indicating serious concerns around management stability.
 
“We see a lack of credible management as a concern when it comes to increasing the non-payments businesses. We believe scaling distribution businesses like insurance distribution, loan distribution, credit card, etc. will need additional investments, and hence growth coming from these new business lines won’t be profitable for a long time to come,” he added.
 
Vijay Shekhar Sharma-led One 97 Communications made a tepid debut on November 18 last year. The scrip listed at a discount of 9.30 per cent at Rs 1,950 on the NSE against the issue price of Rs 2,150 per share.
 
The company extended its losses in the second quarter (July-Sept) to Rs 481.70 crore from Rs 376.60 crore in the first quarter (April-June) of 2021-22. The total income, however, increased by 19.62 per cent to Rs 1,134.50 crore in the same period.
 
The first half losses (April-Sept) stood at Rs 858.30 crore in 2021-22 as compared to Rs 723.60 crore in 2020-21. The total income jumped by 47.95 per cent to Rs 2,082.50 crore in the same period.
 
At 12:50 hours, the shares were trading 0.68 per cent lower at Rs 1,110.75. Market cap of the firm fell to Rs 71,964.86 crore on BSE.