Paytm shares jump 5%; here’s why

Shares of One 97 Communications, the parent of Paytm, surged 5% in early trade on Monday, in an otherwise weak broader market, driven by a spurt in volume trade. The stock price also got a boost amid a report that telecom tycoon Sunil Mittal is seeking a stake in the fintech major by merging his financial services unit into Paytm Payments Bank.

As per a report, Sunil Mittal, the founder and chairperson of Bharti Enterprises, is looking to merge his financial services business, Airtel Payments Bank, into Paytm Payments Bank in a stock deal and is also seeking to buy Paytm shares from other holders. However, the report has not been confirmed either by Paytm or Bharti Enterprises.

“We remain fully focused on our strong organic growth journey and are not involved in any such discussions,” a Paytm spokesperson said in an email statement to Fortune India.

Paytm shares opened 2.67% higher at ₹639.90 against the previous closing price of ₹623.25 on the BSE. In the early trade so far, the fintech stock gained as much as 5.14% to 655.30, with 2.7 lakh shares changing hands over the counter as compared to the two-week average volume of 1.95 lakh stocks.

At 10:40 am, Paytm share price was quoting at ₹631.65, up 1.35%, while the market capitalisation stood at ₹41,025 crore.  In comparison, the BSE Sensex was trading 445 points, or 0.75%, lower at 59,018 levels, led by IT and Teck indices, which dropped 2.5% each.

Paytm shares currently trades nearly 50% higher than its 52-week low of ₹439.60 touched on November 24, 2022, while it hit a 52-week high of ₹844.40 on August 8, 2022. 

Paytm has been one of the worst performing initial public offerings (IPOs) among companies that went public in 2021, with a negative return of around 60% since its listing on November 18, 2021. In the country's second largest-ever IPO, after LIC’s ₹20,560 crore public issue, the company had raised ₹18,300 crore via public listing of shares at an issue price of ₹2,150. The stock has given a negative return of 20.6% in a year, while it dropped 12.7% in six-month period.

However, the stock seemed to have gained momentum in the recent past, rising 19.4% on a year-to-date basis and nearly 24% in a month after the fintech major achieved operating profitability milestone during the December quarter. Many brokerages turned bullish on the stock and raised target prices post the company’s Q3 results. 

For the October-December quarter of the current fiscal, Paytm reported a net loss of ₹392 crore as compared to 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. Of this, the company’s payments revenue grew by 21% YoY at ₹1,197 crore, whereas the revenue for its financial services business grew 257% at ₹446 crore, thus accounting for 22% of total revenue. The company achieved the milestone of EBITDA before ESOP by ₹424 crore YoY to ₹31 crore in Q3 FY23, ahead of its September 2023 guidance.