Paytm jumps 6% on Q1 revenue boost

Shares of Paytm parent One97 Communications rose 6.4% on Monday to ₹834 on the domestic bourses after the digital payments firm posted an 89% growth in revenue in the first quarter.

Paytm said its revenue growth was aided by an increase in subscription revenues due to growing number of payment devices and growth in bill payments and disbursements of loans.

The company said its loan distribution business has scaled up significantly over the last 12 months. The number of loans grew 492% year-on-year to 8.5 million while value of loans grew 779% YoY to ₹5,554 crore.

Value of Paytm Postpaid loans – or buy now pay later loans – disbursed saw a jump of 656% to ₹3,383 crore from ₹447 crore a year ago. Personal loans grew 1,106% YoY to ₹1,344 crore while merchant loans grew 1,031% to ₹827 crore.

Consolidated loss of the digital wallet firm widened to ₹645 crore in the quarter ended June from ₹382 crore in the year-ago period.

Paytm said its user engagement was at its highest with average monthly transacting users (MTU) at 74.8 million for the quarter ended June FY23, up 49% YoY. Gross merchandise value (GMV) for the quarter stood at ₹3 lakh crore for the quarter, up 101% year-on-year. Growth in GMV from MDR-bearing instruments (such as cards, wallets, net-banking and Paytm Postpaid), was 52% on a quarterly basis.

However, brokerages have mixed ratings on the counter. Macquarie Capital Securities retains an “underperform” rating on the stock with a target price of ₹450, implying a potential downside of 46%.

Macquarie had cut the target price of One97 Communications to ₹450 in March this year. On the day Paytm made a dismal public market debut, the brokerage was blunt in initiating a coverage note titled, "Too many fingers in too many pies".

Paytm may witness a hit of ₹400 crore on revenues and ₹500 crore on EBITDA if it makes rentals zero on all of its sound devices for merchants, the foreign brokerage said in its report last week. Paytm's Soundbox has helped it scale up its merchant lending.

"In our view, competitors like PhonePe which are not listed can continue to be loss leaders and try to capture market share. Paytm being a listed entity has compulsions to show profits," Macquarie said.

CLSA, too, maintains a “sell” rating on the stock with a target price of ₹650.

Meanwhile, Axis Securities maintains a “buy” rating on the Paytm stock. It has also raised its target price to ₹1,000 from ₹940 earlier. ICICI Securities too has a “buy” rating on Paytm with target price of ₹1,285.