Macquarie downgrades Paytm; NPCI in talks with Indian, US banks

Global brokerage Macquarie has downgraded Patym’s stock and slashed its target price following the central bank’s regulatory action. This and more in today’s ETtech Top 5.

Also in this letter:
■ IT headcount falls in December quarter
■ Rapido launches SaaS model
■ Endiya Partners’ third fund


Macquarie cuts Paytm target price to Rs 275 after RBI crackdown

One 97 Communications_Paytm Payments Bank_forensic

Crisis-hit Paytm was dealt another blow on Tuesday when global brokerage Macquarie slashed the target price of its stock to Rs 275 from Rs 650, citing a serious risk of customer exodus that “significantly jeopardises its monetisation and business model”. The downgrade comes in the wake of the RBI’s January 31 order.

Brokerage call: Macquarie also cut its revenue estimates for both payments and distribution businesses by 60-65% over FY25/26E.

“Moving payment bank customers to another bank accounts or moving related merchant accounts to other bank accounts will require KYC (Know your customer) to be done again based on our channel checks with partners, indicating that migration within RBI’s Feb 29th deadline will be an arduous task,” the brokerage said.

Stock tanks, again: Paytm shares tumbled over 9% in intraday trade on Tuesday before closing the session at Rs 380, down 10% from the previous day. The stock has been in freefall ever since the RBI order and has lost about 50% of its value. Market experts have warned retail investors to avoid being on the ‘buy’ side till regulatory issues are resolved.

paytm stock

Too little, too late: Paytm parent One 97 Communications made a bunch of changes in its internal functions over the last two years to adhere to regulatory guidelines strictly. Sources told ET that every product decision at Paytm gets vetted by compliance officers these days.

While Paytm tried to become a compliance-first organisation even if it meant sacrificing the speed of innovation, perhaps the RBI was still not satisfied with its progress.

paytm keeping stake

No room for review: On February 12, RBI governor Shaktikanta Das said there is “hardly any room for review” of the central bank’s decision against Paytm Payments Bank. Das said the RBI takes action against regulated entities “only after a comprehensive assessment.”

Paytm crisis_Timeline_

Read our top stories on the Paytm crisis:


NPCI in talks to link Indian, US banks for real-time payment service

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The National Payments Corporation of India (NPCI) and banks in the US and India are in advanced talks for a real-time payment linkage between the two countries, sources told ET. The goal is to build on the domestic payments body’s inroads in setting up cross-country systems.

Tell me more:
Within the unified payments interface (UPI) ecosystem, the NPCI is working with Indian banks that have experience with the system as well as foreign banks to develop use-case models and testing pilots, the sources said.

NPCI gfx

Also, given that the US does not yet have a nationwide system similar to the one created by NPCI, the model would initially focus on small consumer payments.

Also read | Eiffel Tower now accepts UPI payments from Indian tourists

Verbatim: “NPCI is working along with Indian banks and foreign banks to see how they can partner. In addition to talking directly to FedNow or their UPI equivalent on how to connect, they also need the large US banks to partner so that the use-case, testing, etc happens. The process is in advanced stages,” a source said.

What’s in it for US banks?
For US banks, which already have a large share of US-based consumer wallets used for payments, the idea is to partner with the new model being proposed by the NPCI and American authorities to leverage the existing capabilities.

Large local banks in India and the US would need to step in to cater to the huge market for consumer payment flows between the two nations.

Also read | Google Pay India signs pact with NPCI for global expansion of UPI


Headcount at IT biggies falls for four quarters as hiring takes a backseat

Net employee addition by IT service_headcount_Hiring_Jobs_vacancy_employment_recruitment

Indian IT majors saw their headcount fall once again in the October-December quarter, marking a fourth consecutive quarter of declines. These firms cut down on recruitment at the entry-level and were slow in hiring to offset attrition amid an uncertain demand environment in their biggest markets.

Driving the news: According to data from specialist staffing firm Xpehno, the collective headcount of the top eight IT companies — Tata Consultancy Services, Infosys, Wipro, HCLTech, LTI Mindtree, L&T Technology Services, Tech Mahindra and Cognizant’s India business — fell by 17,534 in the quarter compared with the previous three months.

Also read | Top four IT firms report 50,000 fall in headcount over last year

Further, the staff count at these companies was down by 75,000 for calendar year 2023, the sharpest annual fall in at least six years.

IT headcount plummets in 2023_Feb 2024_Graphic_ETTECH_2

Data decoded: The net headcount at these companies started falling in the January-March quarter of 2023, when it fell by 12,455 from the previous three months. The number decreased by 28,387 during April-June, and by 16,624 in the following three months through September, according to Xpheno data.

Hiring takes a hit: ET reported on February 1 that Indian IT firms will end this financial year having hired between 70,000 and 80,000 fresh engineers — the lowest intake in over two decades. Staffing companies estimate that less than a tenth of the 1.5 million engineers expected to graduate from campuses this summer will find a job placement.


Rapido launches SaaS model for auto services

Rapido commitment to boosting voter

Ride-hailing platform Rapido launched a software-as-a-service (SaaS) model for auto services on Tuesday.

How will it work? According to cofounder Pavan Guntupalli, the platform will charge auto drivers a daily login fee between Rs 9 and Rs 29. In return, drivers can do unlimited rides based on demand, without paying any commission.

Rapido currently facilitates over 5 lakh auto rides daily, he said. With the introduction of the SaaS model, it aims to onboard offline auto drivers onto its platform.

Profitability in focus:
“We are already profitable in operations. By the end of this year, we expect to achieve profitability in earnings before interest, taxes, depreciation and amortization (Ebitda),” Guntupalli said, adding that the firm aims to close FY24 with a revenue of Rs 600 crore.

Currently, Rapido has a gross merchandise value (GMV) annualised revenue run rate (ARR) of half a billion rupees, with a monthly run rate of Rs 400 crore.


Endiya Partners announces third fund with corpus of up to $125 million

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Endiya Partners leadership team (L-R) Abhishek Srivastava, Dr Ramesh Byprapaneni, Sateesh Andra, Abhiram Katta

Venture capital fund Endiya Partners is set to launch its third fund with a corpus of Rs 800 crore to Rs 1,000 crore ($100 million and $125 million).

Tell me more: The fund – its largest so far – will continue with the same investment thesis as its two earlier offerings, and will start deploying in a quarter or 3-4 four months from now, founder and managing director Sateesh Andra told ET.

“While 90% of the time, our cheque is the first institutional cheque for a startup, we do super pro-ratas in Series A and we also participate in Series B. For a company, we end up allocating almost $7 million to $8 million,” Andra said.

First fund’s performance:
Launched in 2016, Endiya Partners’ first fund of $40 million generated a distributed paid-in (DPI) capital return of over 90% to its LPs. This metric measures the amount of invested principal returned to LPs through exits sans any carried interest earned by the venture capital firm.

The Hyderabad-based venture capital firm’s past investments include the likes of Darwinbox, Kissht, SigTuple, Zluri, Qapita, Eyestem, Grip Invest, Myelin Foundry and BluJAerospace.

Today’s ETtech Top 5 newsletter was curated by Gaurab Dasgupta in New Delhi and Megha Mishra in Mumbai.