Paytm gaining currency at bourses

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One97 Communications shareswhich operates the Paytm brand, jumped nearly five percent on Monday after analysts turned bullish on the stock as the company consolidated. The loss shrunk to ₹168 crore in the March quarter.

After hitting an intraday high of $729.35, the stock closed at $723.60 – a 4.95 percent gain over the previous day’s close.

The company recorded a loss of ₹761 crore in the same period last year. Consolidated revenue for the quarter grew 51.5 per cent to Rs. 2,334 crore (Rs. 1,541 crore).

“Next Catalyst”

After reporting unchanged credit metrics for five consecutive quarters, Paytm has, for the first time, reported an improvement in ECL (expected credit losses) in its buy-now-pay-later (BNPL) portfolio and lower bounce rates across its BNPL portfolio and personal loans, Goldman Sachs said.

He added, “We believe these results should put an end to debates about Paytm’s business model for traction and profitability, and see the resolution of pending regulatory issues (banning PPBL and annexation of online merchants) as the next set of catalysts for the stock.”

Also read: Paytm Loan Payments Increased 148% In April; The number of loans granted increased by 56% year on year

Foreign broker Citigroup said Paytm has several growth/profitability tailwinds as digital payments continue to see strong growth; And a significant hike to increase the penetration of lending products to existing consumers.

Main risks

However, YES Securities, which kept its neutral stance with a price target of ₹750, said that excluding the UPI incentive attributed to nine months, the contribution margin would be 52 percent. “The contribution margin for the third quarter was 51 percent, which does not have a UPI incentive, which means a flat margin development.”

Similarly, according to Macquarie, many BNPL models have failed all over the world including India. “Although Paytm carries no balance sheet risk on loans originated, it does carry significant business and reputational risk,” the company said. He warned that poor performance for a few months could lead to lenders withdrawing their lines of credit, which would greatly affect their ability to grow.

For the year ended 31st March 2023, One97 Communications reported a loss to ₹1,776 crore as against ₹2,396 crore reported in the previous financial year.