New Delhi: Brokerage house JM Financial has given a ‘sell call for One97 Communications-owned Paytm, with a target price of Rs 1,240.Also Read - Income Tax Return: Making Money From Stock Market? Here’s How to Declare it in ITR Filing

“Paytm faces stiff challenges in its customer acquisition engine, which would slow down its revenue growth in the core payments business while scaling up of its related ecosystem businesses (commerce, Cloud and financial services) leaves much to be desired,” the brokerage said. Also Read - Multibagger Penny Stock: THIS Stock Turned Rs 1 Lakh Into Rs 50 Lakh In Two Years. Do You Own It?

“In our view, Paytm will need to keep funding its ‘MTU’ growth and thus the road to profitability largely relies on the growth trajectory of other businesses,” it added. Also Read - Sensex Plunges 450 Points in Early Trade; Nifty Slips Below 17,800

Also, Paytm will need to adapt itself to this evolving regulatory environment for digital lenders, it said.

Regulation, in its view, is likely to get more stringent than conducive.

The payment service provider company’s shares were listed on the exchanges on November 18, 2021.

On the listing day, the company’s shares closed 27 per cent lower at Rs 1,564, marking a disappointing debut. The company had an offer price of Rs 2,150.

However, lately, the company’s stocks have made partial recovery of its initial losses. On Monday, the company’s shares closed 4.24 per cent lower from the previous close at Rs 1,706.