The shares of One 97 Communications Paytm went up 4 per cent in Tuesday's trade after foreign brokerage CLSA upgraded the stock's rating to 'Buy' from 'Sell' with a target of Rs 650. The stock has gained 9 per cent from its 52 week low of Rs 439.60 on November 24.
Over the past two weeks, CLSA said Paytm's share price has corrected 25 -- 30 per cent on the back of selling by a large shareholder. Our conversations with several investors over the past four months suggests some discomfort or uncertainty about scaling up the lending business, but we think the stock warrants a look now.
The stock was up 3.69 per cent to hit a new high of Rs 478.80 on the BSE.
CLSA said that the company has more than $1 billion cash on the balance sheet and cash burn should end in 4 -- 6 quarters. The Paytm stock is trading at 16 times EV core Ebitda on an FY 26 basis, which is a discount back to FY 24, it said.
It trades at a 25 -- 40 per cent discount to Adyen and Block's EV Ebitda multiples. The foreign brokerage said that the key risk is continued selling by pre-IPO investors, which we can't predict, and we keep all our estimates and target unchanged.
CLSA said that there are a few disclosures that can be improved as a result of nearly a third of the market cap. Cash on the balance sheet is Rs 9,200 crore Paytm's current market cap of $3.5 billion.
While Paytm gives broad data on lending, it should reveal segment-wise lending revenue and delinquency details every quarter, just like NBFCs do. It said that it was welcome to have a breakup of revenue from payment services to customers and merchants.