Sharma is following a ‘rewind-and-reset’ approach to win back investors
Paytm is set to become India’s first internet company to hit $1 billion in annual revenue by March 2023, and the company is also shifting its focus from growth to profitability, according to a Bloomberg report quoting the digital payments firm’s founder and CEO Vijay Shekhar Sharma. “For me, the public listing (which took place in November 2021) was a sort of graduation, and taking Paytm to break-even and to profits gives me a clarity of purpose,” Sharma said.
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Sharma is following a “rewind-and-reset” approach to win back investors. He said one of the steps towards this is demystifying of Paytm’s revenue structure. “I want to make Paytm the most relevant payments company of our times”, he said, according to the report. The Paytm brand is owned by One97 Communications, which is owned by Vijay Shekhar Sharma.
In the past months, Sharma has told investors that his strategy will allow Paytm to reach operational break-even by September 2023. The company has slashed spending and is considering an exit from a pricey cricket sponsorship and terminating an agreement to acquire insurer Raheja QBE General Insurance, the report added.
Meanwhile, bullish on the company’s strong performance in Q1 FY23, equity research firm Goldman Sachs has maintained its stock rating to ‘Buy’ and forecasts elevated growth and margins in its first quarter results.
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Analysts at Goldman Sachs on Wednesday (July 27) set Paytm’s stock at a target price of Rs 1,050, with an upside of 47.1 per cent, after the company shared that it will declare its Q1 FY23 results in exchanges on August 5. The research firm further added, “We believe this should help allay investor concerns on the stock. We view risk-reward for Paytm as skewed to the upside, with 106 per cent upside in our bull case versus 17 per cent downside in the bear case. We believe the current share price continues to offer a compelling entry point into India’s largest and amongst the fastest-growing fintech platforms.”
It also said Paytm’s operating performance has consistently remained strong. It forecasts a third consecutive quarter of 90 per cent YoY revenue growth for the company in Q1 FY23, a surge of 10 per cent q-o-q, with Ebitda margins improved by 13 per cent QoQ to Rs 320 crore. “We believe Paytm is firmly on track to achieve Ebitda profitability by the end of FY24 (as per the company guidance of Sept 2023), while growing topline at a 38 per cent FY22-25E CAGR (compound annual growth rate), at the higher end of our global fintech coverage,” it said.
The research firm said Paytm’s MTU (monthly transacting users) has risen to 76 million as of June 2022, against 70 million as of February 2022, suggesting no impact on user acquisition of the RBI’s ban on Paytm Payments Bank in March 2022. It said its MTUs has been seeing strong growth of 4 million QoQ net adds in Q1FY23, with rising GMV per MTU QoQ. As per SensorTower data, Paytm’s monthly app downloads have been moving up.
