Shares of One97 Communications, the parent company of Paytm, hit another record low on Thursday as pre-IPO investors continued to exit the fintech, triggering a selloff.

The stock fell 2.5% to ₹441 on the National Stock Exchange (NSE), about 80% lower from its IPO issue price of ₹2,150 and 2% down from Macquarie Capital Securities' target price of ₹450.

With the latest slide in its share price, Paytm's market cap has slipped to around $3.5 billion for the first time. That's way below its IPO m-cap of $20 billion and its last private valuation of $16 billion in November 2019.

Amid all this gloom, Citi Research continues to give a 'BUY' rating for Vijay Shekhar Sharma-led Paytm, with a target price of ₹1,055, indicating a potential upside of 139% from the current levels.

In case of a bull market, Citi sees the stock at ₹1,230, suggesting a 179% potential return. In a bear case scenario, it sees the stock at ₹605, a potential 37% upside.

"We acknowledge overhang risks from further selling by existing pre-IPO shareholders and that fintech is a competitive space but at these valuations, those risks are overdone," the brokerage says.

"This stock is High Risk based upon our quantitative model, but its healthy net cash position and likely declining cash burn going forward do not support a High Risk rating," it adds.

Citi says Paytm's lending business has been growing at a fast and steady pace, beating its competitors.

Paytm Postpaid – the fintech's Buy Now Pay Later business – is way ahead rival Lazypay, claims Citi.

In its second quarter earnings, Paytm said its Postpaid business has over 6 million users and is accepted by over 15 million online and offline merchants at the end of second quarter of FY23. The number of Postpaid loans disbursed grew 220% year-on-year in Q2 FY23, while the value of Postpaid loans soared 449% Y-o-Y to ₹4,050 crore.

It's not just about the growth of the product as Paytm's BNPL product has better stable asset quality, the brokerage says. While Lazypay reported a loss rate at around 3.1% year-to-date, an increase of 30 bps versus 2021, Paytm has reported stable asset performance across its lending partners' portfolio with loss-rates at 1.1-1.3% for the Postpaid BNPL product, the report says.

Additionally, the average ticket size of personal loans availed through Paytm's platform has increased in the quarter ended September, indicating that the company's loan distribution business in partnership with financial institutions is gaining momentum every quarter, says Citi Research.

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