Shares of One 97 Communications, the parent of Paytm, tumbled over 4% in intraday trade on Monday, paring opening gains, as investors reacted to its June quarter earnings report. The fintech company saw its net loss narrowing on a year-on-year basis, but it widened on a sequential basis.

Paytm shares opened flat at ₹843.55 on the BSE and gained as much as 1.6% to ₹857 in the early trade on the BSE. The stock, however, lost momentum and declined as much as 4.1% to hit an intraday low of ₹808.80 during the trade so far. The large-cap stock has fallen 5.6% from the day’s high of ₹857 on the back of a surge in selling activities. On the volume front, 2.27 lakh shares changed hands over the counter as compared to the two-week average volume of 1.62 lakh scrips, whereas the market capitalisation dropped to ₹52,022 crore.

Paytm shares have witnessed decent growth in the last year, especially in the calendar year 2023, after the company reported constant improvement in contribution margin and operating leverage, which may drive operating profitability. The stock has risen 8% in 12 months, while it surged 56% on a year-to-date (YTD) basis. The stock gained nearly 51% in a six-month period and touched a 52-week high of ₹915 on June 19, 2023. In the last one month, the counter has lost over 2%, while it shed nearly 4% in a week. It hit a 52-week low of ₹439.60 on November 24, 2022.

For the April-June quarter of FY24, Paytm reported a consolidated net loss of ₹357 crore compared to a loss of ₹644 crore in the corresponding period last year and ₹168 crore in the March quarter (Q4 FY23).

The consolidated revenue from operations jumped 39.4% to ₹2,341 crore in Q1 FY24, from ₹1,679 crore in the year-ago period. However, it was flat as compared to ₹2,334 in Q4 FY23. The YoY growth in revenue was driven by an increase in merchant subscription revenues as well as Gross Merchandise Value (GMV) and growth in disbursements of loans through its platform, Paytm said in a release.

The contribution profit for the first quarter was up 80% YoY and 2% QoQ to ₹1,304 crore. The margin increased by 1,248 basis points (bps) YoY and 72 bps QoQ to 56%.  

At the operating level, EBITDA before ESOP improved to ₹84 crore, with margins at 4%, on the back of an increase in contribution margin and operating leverage.

During the quarter under review, the number of loans distributed through the Paytm platform grew to 1.28 crore, up 51% YoY, while the value of loans distributed surged 167% YoY to ₹14,845 crore.

In Q1 FY24, revenue for financial services and others grew 93% YoY to ₹522 crore on account of the increase in repo rates over the last year. The payments revenue grew by 31% YoY to ₹1,414 crore, led by an increase in GMV and higher subscription revenue. As of June 2023, the merchant subscriptions were 79 lakh, increasing 41 lakh YoY and 11 lakh QoQ. 

Analysts view on Paytm Q1 results

Based on 10 reports from 3 analysts, the average target price for Paytm shares is ₹925.33, which represents an upside of 13.25% from the last price of 817.10, as per Trendlyne data, a stock market analysis platform.

Post Q1 results, CLSA has reiterated its 'Buy' rating on Paytm shares with an upgraded price target of ₹1,050 from ₹850 earlier, an upside potential of 24% over the last closing level.

Foreign brokerages Citi and Goldman Sachs have also assigned ‘Buy’ ratings. While Citi has raised the price target to ₹1,200 from ₹1,160 earlier, Goldman Sachs revised the price to ₹1,200 from ₹1,150 estimated earlier.

Domestic brokerage house JM Financial has also recommended 'Buy' on the stock with a revised target price of ₹1,060, valuing Paytm at FY30E EV/EBITDA discounted back to FY25.

Macquarie has maintained its neutral rating on the stock with a target price of ₹800. Last month, the brokerage house downgraded Paytm’s rating to neutral, just four months after a double upgrade, citing faster momentum in the financial services business as an upside risk.

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