Alibaba sells entire stake in Paytm; stock rises 3%

Shares of One97 Communications, which operates under the Paytm brand, rose 3% in opening trade on Monday after Chinese company Alibaba sold its remaining 3.16% stake in the digital financial services firm for about ₹1,360 crore in a block deal on Friday. As per the National Stock Exchange (NSE) data, Alibaba offloaded 21.43 million shares of Paytm at ₹642.74 apiece to investors, including Morgan Stanley.

Alibaba, which held a 6.26% direct stake in Paytm as of December 2022, sold a partial 3.1% shares in the company in January. Besides, Alibaba's affiliate Ant group nominee Douglas Feagin resigned from the company’s board last month.

In May last year, the Jack Ma-founded firm had exited Paytm Mall by selling its stake worth ₹42 crore.

Paytm shares opened flat at ₹650.20 and rose as much as 3% to ₹669.65 in the opening deals. In the previous session, the fintech stock closed 7.85% lower at ₹650.55 amid strong volume trade. Paytm shares have risen 52% against its 52-week low of ₹439.60 touched on November 24, 2022. It hit a 52-week high of ₹935 on February 11, 2022. The stock has delivered a negative return of 22% in the last one year, while it dropped 14% in the six-month period. In the last one month, the stock jumped 20%.

The fintech stock has risen over 27% in the last six sessions after founder Vijay Shekhar Sharma-led company posted its first-ever quarterly operating profit as a listed firm, much ahead of its own target. The payment solutions company posted EBITDA before ESOP cost at ₹31 crore in Q3 FY23, nine months ahead of its guided timeline of September 2023. The stock also got a boost after some foreign brokerages raised target price for Paytm shares as it achieved an operating profitability milestone during the December quarter.

Last week, Paytm released its Q3 earnings, which showed that its net loss narrowed to ₹392 crore in the quarter ended December 31, 2022, as compared to the loss of ₹779 crore in the same period a year ago. The revenue from operations rose 42% year-on-year (YoY) to ₹2,062 crore, driven by an increase in merchant subscription revenues, growth in loan distribution and momentum in commerce business. During the quarter, the company’s earnings before interest, taxes, depreciation and amortisation (EBITDA) before ESOP improved by ₹452 crore YoY. 

Besides, Paytm also released its business operating performance for January 2023, which saw consistent growth in its total merchant payments value. The total merchant gross merchandise value (GMV) processed through the platform in January aggregated to ₹1.2 lakh crore ($15 billion), posting a YoY growth of 44%. The company continued to reign the market in offline payments with 6.1 million merchants now paying subscriptions for payment devices, while MTU stood at 89 million, registering a robust growth of 29% YoY. 

Following Q3 results, foreign brokerage houses such as Citi, Goldman Sachs, Bank of America (BofA), CLSA have recommended a “Buy” rating on Paytm shares and raised target price targets as high as ₹1,150. While Citi, CLSA, and Goldman Sachs have assigned “Buy” rating to the stock, BofA maintained its 'neutral' rating.