Paytm, India’s leading fintech giant, has a robust business model, which will soon lead to profits, said Sunny Agrawal, Head of Fundamental Equity Research Team, SBICAPS Securities, in a TV interview. He added that Paytm has guided that over the next few quarters, the profit is going to start reflecting in the P&L and the balance sheet of the company.
Agrawal mentioned that new age tech companies have the potential to become multibagger in the next 5 to 10 years, as this sector is witnessing consolidation. Agrawal also noted that a few players of this sector will enjoy the expansion in the industry. "Once we see the profits picking up, we would probably like to bet on Paytm," he iterated.
Analysts at ICICI Securities in 4th January 2023 note highlighted that Paytm in its monthly update reported Rs 2.3 trillion GMV in two months ended November 2022. "Assuming slight increase, monthly run rate of nearly Rs1.1 trillion, we estimate 10% quarter-on-quarter growth in GMV to Rs 3.5 trillion. Paytm also reported an average MTU of 84.0 million. Also, 6.8 million number of loans and Rs 63 billion value of loans disbursed through its platform during two months ended November 2022.
ICICI Securities estimates 11% quarter-on-quarter operating revenue growth on the back of increasing GMV and lending business along with some increase in commerce and business. "With management’s focus on improving its operating profitability, we expect its direct expenses to decline sequentially and employee expenses (excl. ESOP) to be more or less flat which should improve its adjusted EBITDA (EBITDA before ESOPs)," it added.
Following the share buyback announcement last month, top brokerage firms gave a thumbs up to Paytm. In a note dated 13th December 2022 on Paytm, Morgan Stanley gave an 'equal-weight' call on the company shares and said that the cash position of the company has been strong at Rs 9,180 crore as of September 2022. The brokerage firm pegged a target price of Rs 695 apiece, a potential rally of 30% from the last close.
JP Morgan maintained 'overweight' rating for the stock with a target price of Rs 1,100 per share. "We value Paytm using a DCF valuation, baking in a rising cost of capital with a 18.5% COE and a 20x exit multiple that yields a Mar-23 PT of Rs 1,100," it added. The target price suggests that the company's share price may more than double, rising 105.5% from the previous close.
Global financial investment and advisory firm CLSA in its note dated 28 November 2022, upgraded its rating on Paytm to 'buy' from 'sell'. It said Paytm has more than $1 billion cash on the balance sheet and the cash burn should end in another 4-6 quarters. The global brokerage firm also predicted the 'cloud' revenue to double to Rs 14 billion over FY22-25 driven by increasing advertising revenue coupled with higher credit card sourcing income.
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