Paytm share price rally over 4% as BofA Securities upgrades stock

Fintech startup Paytm's share price rose over 4% on Friday, extending its rally for the third consecutive session on the back of some positive sentiments.

The stock price of Paytm's parent One 97 Communications increased as much as 4.8% to an intraday high of Rs 809.45 apiece on the BSE.

Its stock witnessed more than 6% gains in the previous session, according to a report by Livemint.

This rally in Paytm shares follows shortly after its parent received an upgrade from Bank of America Securities as it finds risk-reward turning more positive for the stock. 

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Another firm, BofA Securities, also upgraded Paytm to ‘Buy’ from ‘Neutral’ and increased the target price to  Rs 885 per share from Rs 780 earlier on the back of strong revenue momentum and operational leverage.

It finds Paytm well-positioned to continue to dominate the SME merchant landscape where the subscription model via soundbox is improving merchant stickiness.

“We estimate adjusted EBITDA margins to improve from -2% in FY23 to 8% by FY26. In fact, we think operational leverage could further surprise both on our and consensus estimates," the brokerage house said.

Paytm had recorded a 35% year-on-year rise in the gross merchandise value to Rs 2.65 lakh crore in April-May 2023, the company said earlier in June.

For the fourth quarter ended March 2023, Paytm's revenue rose by 51% to Rs 2,334 crore from Q4 FY22, while net payment margin also improved by 158% to Rs 687 crore year-on-year.

It improved EBITDA before ESOP by Rs 602 crore for Q4 FY23 over the comparable quarter previous fiscal year, valuing it at Rs 176 crore for FY23.