The shares of One97 Communications, parent firm of Paytm, settled 19 per cent lower on Thursday, a day after the company announced it will focus on high-ticket lending and go slow on loans that are less than Rs 50,000.

On the BSE, Paytm shares tumbled 18.69 per cent to end at Rs 661.30 per share. The scrip of the company nosedived 18.74 per cent to close at Rs 660.70 apiece on the NSE.

Small ticket lenders, particularly fintech firms who had thrived in the past year with their buy now pay later (BNPL) plans, are scrambling to lower their exposures after a recent regulatory warning about a ticking time bomb that indiscriminate unsecured personal loans pose to their businesses and books.

The most noteworthy among them is Paytm which has decided to go slow on loans that are below Rs 50,000 in a gradual manner. Its parent One97 Communications has indicated a 40-50 per cent drop in low-ticket lending.

“Post-paid loans (PLs) is a portfolio which is predominantly under Rs 50,000. On the back of macro developments and regulatory guidance, we have decided to scale back this portfolio,” Bhavesh Gupta, Paytm’s president and chief operating officer, said in a conference call on Wednesday.

The company’s decision hurt its share prices badly as few brokerages downgraded the stock and cut its target price. During the day, it tanked 20 per cent to hit the lower circuit on both the BSE and NSE.

Last month, the RBI increased the risk weightage on banks and NBFCs exposure to unsecured personal loans and credit cards.

Loans below Rs 50,000 are one segment in personal loans where lenders have turned extra cautious as there has been some uptick in consumers missing their repayments.

“RBI has raised the risk weights on NBFCs’ unsecured personal loan exposure by 25 per cent. This adjustment is expected to impact the capital buffers of NBFCs,” CareEdge Ratings said in a note.

“Consequently, there may be a slowdown in lending. We expect this situation to result in greater than normal increase in funding through securitisation and co-lending partnerships, serving as alternate sources of liability for NBFCs.”

JP Morgan alert

Calling Paytm’s move as a “profit warning’’, JPMorgan which downgraded the stock to neutral’ from ‘ overweight and reduced the target price to Rs 900 from Rs 1,200, said that a slowdown seems pre-emptive in nature as Paytm has not witnessed a deterioration in portfolio quality.

“We assume a sustained slowdown in BNPL (Buy Now Pay Later) over 2024-25 and do not give credit on offsets via a pick-up in merchant loans/high ticket loans or any flexibility that Paytm may have on direct costs,” the report added.

“Paytm’s strategy to move away from small ticket size BNPL loans will affect the total loan originations via the platform as the segment forms over 50 per cent of total disbursements.”

With inputs from Calcutta Bureau