Shares of One 97 Communications Paytm went up 3 per cent in Friday's trade, snapping a four-day losing streak. The scrip that hit an all time low of Rs 439.60 in the previous session staged a recovery, rising 4.7 per cent to hit a high of Rs 461.80 in early Friday trade on bargain hunting. The scrip was down recently after a Macquarie report said that Reliance Group's Jio Financial Services could be a formidable threat to Fintechs like Paytm.
In a note on Friday, Arihant Capital said that there was better improvement in the margin profile with better monetisation which indicates the achievement of operating profitability positive Ebitda before the ESOP cost ahead of its guided timeline of Q 2 FY24.
Net payment take rate has improved, which is an encouraging sign, according to the brokerage. Payment revenue in Q2 was supported by continued platform expansion across MTU and merchant base, growth in subscription and MDR revenue from offline merchants and higher GMV from online merchants in payment gateway business, while not offering any target for Paytm, it said.
Foreign brokerage Citi said last week that while overhanging risks for Paytm such as competition and selling by existing pre-IPO shareholders stay, the risks look overdone at the prevailing valuations. There is a potential 139 per cent upside, as it has a target of 1,055 on the stock.
JM Financial said this week that Paytm revenue will grow at a strong CAGR of 32 per cent over FY 22 - 26 E, aided by scale in the financial services business. It sees risks to the current take rates. The brokerage has a target of 600 on Paytm stock.
We believe that the incremental path to profitability is mainly dependent on continued improvement in overall revenue, coupled with a reduction in marketing and cash back spends and ESOP costs for Paytm.