Just four months after it gave a double upgrade to One 97 Communications, the parent of payments service provider Paytm, Macquarie has downgraded the stock yet again to neutral from the earlier rating of outperform.

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Macquarie had double upgraded Paytm in February to outperform from underperform and raised its price target to Rs 800 from Rs 450 earlier. However, despite the downgrade to neutral, Macquarie has maintained its price target for Paytm at Rs 800.

A sharp run-up that the stock has seen so far in 2023 has driven Macquarie to downgrade the stock. Shares of Paytm have risen nearly 60 percent so far this year, compared to a 3 percent rise on the Nifty 50. Despite this surge, the shares still remain well below their IPO price of Rs 2,150.

The brokerage has also highlighted business and reputation risks that lie ahead for Paytm, which goes down as another key reason behind the downgrade. Macquarie further expects the lending business volumes to be volatile over cycles.

Macquarie highlights two major overhangs and negative risks for the stock going forward. One of the key risks is Ant Financial looking to sell 25 percent stake in the company will be a likely overhang for the stock. Another risk would be any Jio Financial Service-related announcement in the Reliance Industries' AGM could be another negative trigger.

In one of the first ratings assigned to Paytm, Macquarie assigned an underperform rating to the stock with a price target of Rs 1,200 and later downgraded it to Rs 900, Rs 700 and even Rs 450, before upgrading the stock in February.

Out of the 13 analysts that track Paytm, 10 of them now have a buy recommendation, while three have a hold rating. However, even the highest price target on the stock of Rs 1,260 from Dolat Capital Markets, is well below the stock's IPO price of Rs 2,150.

Shares of Paytm are trading 1.7 percent higher at Rs 852.70.

First Published:Jun 27, 2023 10:15 AM IST