(Bloomberg) -- Shares of One 97 Communications Ltd., the parent of India’s leading digital payments brand Paytm, plunged to a record low on Tuesday after Macquarie Group Ltd. analysts flagged risks from billionaire Mukesh Ambani’s foray into the financial services business.
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Reliance Industries Ltd.’s Jio Financial Services Ltd. “can pose a significant growth and market-share risk” for players such as Paytm and Bajaj Finance Ltd., Macquarie analysts led by Suresh Ganapathy wrote in a note on Monday.
The shares fell more than 11% in Mumbai, to head for their lowest level since the company’s debut on exchanges last November. The stock has dropped about 75% from its listing price as Paytm’s losses widened and SoftBank Group Corp. lowered its stake in the company.
Reliance already has a non-banking finance company license which it can leverage to kickstart consumer and merchant lending in a big way, according to the Macquarie analysts, who have a target of 450 rupees on Paytm with an underperform rating. The stock was trading at 487 rupees as of 1:05 p.m. local time.
The warning comes after Reliance Industries last month announced it would spin off and list its financial services unit to bolster its presence across consumer businesses. This throws up a new challenge for Paytm which has struggled since its $2.3 billion IPO in 2021, which was one of the biggest offerings in India ever.
“Jio’s plan has added woes for Paytm,” said Prashanth Tapse, an analyst at Mehta Securities. “The plummeting valuations of consumer technology companies is making it difficult for new investors to keep faith in these stocks.”
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