Shares of One97 Communications, the parent of fintech firm Paytm, hit an over three-month high. What should investors do now?
Paytm Shares: Shares of One97 Communications, the parent of fintech firm Paytm, hit an over three-month high of Rs 739 as the stock gained 4 per cent on the BSE in Thursday’s trade amid heavy volumes. At 10:55 am, Paytm traded at Rs 737, as compared to 0.43 per cent rise in the S&P BSE Sensex.
Stock Price History
The Paytm stock traded at its highest level since March 11, 2022. In the past two months, the stock has rallied 36 per cent and has recovered 44 per cent from its record low of Rs 511, touched on May 15, 2022.
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Despite the sharp run-up in the past two months, Paytm has underperformed the market by falling 34 per cent in the last six months, as against a 12 per cent decline on the Sensex. The stock currently trades 66 per cent lower against its issue price of Rs 2,150 per share. Paytm had made its stock market debut on November 18, 2021. It hit a record high of Rs 1,961.05 on its listing day i.e. November 18, 2021 but has failed to touch its issue price since listing.
In the April-June quarter of fiscal 2022-23 (Q1FY23) Paytm’s total gross merchandise value (GMV) continued to remain strong as it clocked a robust growth (over 101 per cent YoY) at 2.96 trillion. Consumer engagement is at its highest on Paytm Super-App with average monthly transacting users (MTU) at 74.8 million for Q1FY23, up 49 per cent YoY.
The total number of loans disbursed grew 492 per cent YoY to 8.5 million in Q1FY23 (v/s 1.4 million in Q1FY22). The total value of loans disbursed grew 779 per cent YoY to Rs 5,554 crore in Q1FY23 (from Rs 630 crore in Q1FY22). The lending business is now seeing disbursements at an annualized run-rate of Rs 24,000 crore. Average ticket size is witnessing a continuous increase due to a scale-up in Personal loans.
What Do Analysts Say?
In the case of Paytm, Yes Securities expects overall revenue growth from operations to grow 17.5 per cent QoQ. “With steady loan disbursements and new device addition, we expect Paytm to post healthy sequential growth in revenue. However, RBI’s embargo on customer additions for the Payments Bank on March 11 would have its impact,” it said.
ICICI Securities estimates about 16 per cent QoQ operating revenue growth. “With management’s focus on improving its operating profitability, we expect its some direct, employee and software expenses to decline sequentially which should improve its adjusted EBITDA (EBITDA before ESOPs),” it said.
Paytm derives around 78 per cent of its revenues from the payment and financial services division and 20 per cent from commerce and cloud services.
“We expect Paytm to see strong revenue growth across all its business segments thanks to device monetization in payments, financial services cross-selling, ticketing recovery, and rising ad monetization. We see revenues growing at a >40 per cent CAGR over F22-26 to $2.8 billion and CMs rising to 44 per cent by FY26E. We see it retaining the highest revenue and profit levels among local vertical and global horizontal peers,” analysts at JP Morgan said in its recent report.
Santosh Meena, Head of Research, Swastika Investmart Ltd., said: “The counter found a base at the 500 level as some value buying emerged followed by a period of wealth destruction. Now, it is witnessing a breakout of the key hurdle of Rs 700 with decent volume that may lead to a short-term upswing towards Rs 870/ Rs 990 levels. On the downside, 670 will act as an immediate and strong support level.”
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