Mutual funds holding in troubled Paytm (One 97 Communication) have increased 70 per cent to ₹3,384 crore in January compared with ₹1,995 crore in December as they ramped up exposure to average cost. Investors who have bought stock at a high price tend to buy more of the same stock when it falls. This helps them bring down the overall cost of investment.
In volume terms, fund houses hiked their holdings by 41 per cent in January to 4.4 crore shares, compared with 3.2 crore in December.
This comes even as the average share price of the company increased to ₹761 in January, up from ₹635 in December.
Vaibhav Kaushik, Research Analyst at GCL Broking, said mutual funds are attempting to average their costs as the stock price has come under pressure after the RBI action. The RBI diktat has hit only a small portion of the Paytm business, and the fair value can be close to ₹700 a share in the next one year even after writing off the finance bank business, he added.
However, Nirav R Karkera, Head of Research at Fisdom, said the operational restrictions imposed by the RBI on Paytm Payments Bank late last month could have an impact on the lending business, which contributes about 18-20 per cent to its total revenue. Ever since RBI action, Paytm shares have dropped by about 55 per cent. But the stock was locked in the upper circuit in the last three days with no sellers and closed with a gain of five per cent at ₹395 on Wednesday.
In a bid to work around RBI restrictions, the company has announced that it has shifted the nodal account to Axis Bank.
BULLISH FUND HOUSES
About seven fund houses have raised their holdings, while Baroda BNP Paribas made a new entry last month, according to Fisdom Research. But HSBC MF has completely exited the Paytm counter by selling 6.2 lakh shares in January.
Nippon MF and Mirae MF have the highest exposure to Paytm through 10 schemes, while Motilal Oswal MF has the third highest exposure through nine of its schemes.
Incidentally, Motilal Oswal MF and UTI MF increased their stake by five and four times in January, while Nippon MF and Mirae MF did it by 66 per cent and 33 per cent, respectively.
ICICI Pru MF, SBI MF, Kotak MF, Bandhan MF, Tata MF, and Edelweiss MF have exposure to the stock through their passive funds.
Six schemes of Aditya Birla MF have reduced its stake by 11 per cent and Quant MF has cut exposure by 72 per cent.
Manish Chowdhury, Head of Research, StoxBox, said the recent RBI crackdown on Paytm Payments Bank is a reputational risk to the overall Paytm business and casts doubt over the visibility of business performance in the future.
The hopes of a breakeven at the EBITDA level in FY25 now look difficult, with the tarnished brand name forcing customers to switch to rival companies, he said.
With lots of news flows surrounding the business, it is advisable to stay away from the counter until there is some stability in the business performance, he advised.