Paytm spikes up by 7% post improved Q3 results

Shares of One97 Communications Ltd, parent of digital payments and financial services firm Paytm, on Monday spiked up over 7% on the BSE, following the company reporting an operating profit for the third quarter of the current fiscal (Q3FY23), nine months ahead of its target of September 2024. 

Paytm stock rose 7.44% to Rs 563.95 against the previous close of Rs 524.90 on the BSE. The stock opened with a gain of 4.78% at Rs 550.

The company narrowed its Q3 loss to Rs 392 crore for the quarter ended December from Rs 779 crore a year ago while the net income increased to Rs 2,140 crore from Rs 1,533.4 crore earlier.

Operating revenue for the company increased 42% to Rs 2,062 crore. 

“The growth was driven by increase in merchant subscription revenues, growth in loan distribution and momentum in commerce business,” the Paytm's parent said in an exchange filing late Friday.

Paytm said it disbursed 10.5 million loans worth Rs 9,958 crore in the third quarter, up 137% from the same period last year. As of December 2022, 8.1 million borrowers had availed loans on the Paytm platform, adding 1.4 million new borrowers in the latest third quarter. The opportunity “for newer payment and credit disbursement solutions is huge, which gives us quality revenue and attractive profit pools to address," CEO Vijay Shekhar Sharma said in the statement.

Paytm listed on the public market in November 2021, crashing on debut and dropping by about 66% since then.

Brokerages remained upbeat on Paytm shares on the back of positive Q3 results. CLSA, Goldman Sachs and CITI each maintained a ‘buy’ rating on the stock while Morgan Stanley has an ‘Equal weight’ call.

In a note, Goldman Sachs said, "On the back of 3QFY23 results, we lower our FY23E-25E revenue estimates by up to 3%, due to continued mix shift towards UPI and weaker than expected cloud revenues. However, our EBITDA estimates see a sharp increase on better than expected cost control. Our revised 12-month DCF/SOTP based target price is Rs 1,150 (was Rs 1,120; WACC and terminal growth assumptions of 14% and 5% unchanged). We reiterate our Buy rating (on Conviction List) and believe Paytm’s current share price continues to offer a compelling entry point into India’s largest and one of the most profitable fintech platforms."