The Financial Express

One97 Communications, the parent firm of Paytm, saw its share price soar 8% on Monday even after the company, on 20 May, reported a loss of Rs 762.5 crore for the March quarter of the financial year 2021-22. Paytm’s revenues from operations were up by 89% on-year, coming in at Rs 1,541 crore. For the full year FY22, the company posted a loss of Rs 2,396 crore against a loss of Rs 1,701 crore in the previous fiscal. Paytm shares have plunged 73% from issue price of Rs 2,150. The stock was quoting at Rs 624 on BSE intraday, up 8.38% after it announced that it expects the issue of RBI ban on its subsidiary Paytm Payments Bank to onboard new customers to be resolved in 3-5 months. Brokerages remain mixed on the stock.
According to analysts at ICICI Securities, Paytm’s financial services revenue is expected to grow at a CAGR of 58% over FY22-FY26, comprising 19% of operating revenue, and its merchant GMV is slated to grow at 35% CAGR over FY22-FY26 to reach Rs 28 lakh crore by FY26. One of the key drivers towards profitability would be improvement in contribution margin, said the analysts. “We remain conservative and expect the company to be EBITDA-positive by FY25E. Maintain BUY with an unchanged target price of Rs 1,285 based on customer lifetime value methodology,” the brokerage said in its report.
“Paytm’s 4QFY22 results exhibited another quarter of strong and improving monetization of the payments vertical, while growth momentum for financial services and cloud businesses remain robust. All this while cash burn has been improving, and the company reiterated its guidance of adjusted Ebitda breakeven by September 2023, which we see as a key catalyst for the stock,” Goldman Sachs said as it put a target of Rs 1,070 on the stock. Paytm’s lending business has been scaling up well while maintaining good credit metrics, which it believes should further help allay investor concerns. “Overall, we raise our topline estimates by 3-4% and expect growth momentum to sustain; we forecast 90% YoY revenue growth for Paytm in 1QFY23, with 38% FY22-25E revenue CAGR,” the foreign research firm said.
According to analysts at Yes Securities, Paytm’s business trajectory is admirable, but longish runway still remains for bottomline profitability. “We maintain ‘Reduce’ on Paytm with a revised price target of Rs 580 as we value Paytm at 5.5x FY23 P/S, factoring in customer addition embargo and increased regulatory risk,” the brokerage said.
International brokerage firm Macquarie has maintained an ‘underperform’ rating on the stock and has kept its Rs 450 target intact. “The profitability is still an uphill battle, while there was a marginal improvement in EBITDA losses and operating take rates are still weak. The financial services business still sub-scale, however core business model uncertainties remain. It could take 12 quarters for EBITDA losses to break-even,” it said. Macquarie’s coverage of the stock has been keenly followed by investors ever since it first came out with its initial report on the listing day of the stock. From an initial target of Rs 1,200 to Rs 900 in January, Rs 700 in February and Rs 450 in March, the foreign brokerage has made a few downward revisions to the target price in the last couple of months.
(The stock recommendations in this story are by the respective research analysts and brokerage firms. Financial Express Online does not bear any responsibility for their investment advice. Capital markets investments are subject to rules and regulations. Please consult your investment advisor before investing.)
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