Paytm Shares: Following the recent sharp decline in the share price and the company's Q4 business update, foreign brokerage Morgan Stanley said it has given One 97 Communications (Paytm) an equal-weight rating and suggested a target of Rs 935 on the shares. The brokerage firm maintains its previous assigned price objective of Rs 935 while expecting the stock of One 97 Communications, the parent company of Paytm, to rise by as much as 46%. Earlier last month, when the Reserve Bank of India (RBI) prohibited Paytm Payments Bank from accepting new customers because of supervisory concerns, Morgan Stanley reduced its target price to Rs 935 and lowered its rating to "equal weight."
The stock was down 1.41 percent and traded at Rs 627.80 on Thursday afternoon's BSE. The stock may rise by 46%, according to Morgan Stanley's target.
The company gave a forecast for operating Ebitda break-even in the following six quarters, which has put the stock in the news.
Paytm is nearing the conclusion of its current investment phase, according to Morgan Stanley, and the business anticipates a reduction in indirect costs. "As of now, we anticipate Ebitda break-even in F25 and will review our projections following Q422 reporting. Due to the aforementioned, Paytm does not anticipate any changes to its development trajectory, according to Morgan Stanley.
This brokerage identifies favorable execution of financial services in terms of underwriting, the introduction of interchange on wallets as they become interoperable, allowance of merchant discount rate under UPI, the introduction of interchange on wallets, and significant bank or NBFC tie-ups as key upside risks.
Vijay Shekhar Sharma, the founder, and CEO of One97 Communications, stated yesterday that Paytm aims to reach operating EBITDA breakeven (EBITDA before Esop cost) by the end of September 2023.
In a letter to shareholders, Sharma stated that Paytm's shares have dropped dramatically from the IPO price due to the unstable market circumstances for high-growth businesses around the world.
"Our shares are down dramatically from the IPO price due to the unstable global market conditions for high growth stocks. You may have faith that the whole Paytm team is dedicated to building a sizable, successful business and generating long-term shareholder value. In line with this, my stock grants won't become effective for me until our market cap has consistently exceeded the IPO level, according to founder and CEO Vijay Shekhar Sharma, who announced on Wednesday.
At a market valuation of Rs. 1.39 lakh crore, Paytm offered shares to the general public for Rs. 2,150 each. Since its debut in November 2021, the stock has been in a downward trend, falling more than 70%, and its market capitalization has shrunk to Rs 41,000 crore.
Paytm had lately been questioned by BSE on the sharp decline in the value of its stock. The company's shares have declined as a result of investors' declining interest in loss-making growth enterprises due to increased interest rates, uncertainty regarding Paytm's path to profitability, and recent regulatory measures against the company. According to Paytm, its lending business grew to 65 lakh loan disbursals during the quarter, totaling Rs 3,553 crore in loans, up 417 percent YoY. Approximately Rs 1,460 crore in total loans were disbursed in March, up from Rs 1,170 crore in February and Rs 920 crore in January.
With 90 lakh devices deployed throughout the quarter, Paytm said that the offline payments business accelerated. The overall number of deployed devices increased to 29 lakhs. Compared to 20 lakh devices in the prior quarter, this is.
Morgan Stanley highlighted that the RBI has prohibited the onboarding of new customers at Paytm Payments Bank and has not yet made clear any prospective changes to the fees associated with digital payments. It observes a minor adjustment as the latter might advance.
We use adjusted F26e EV/sales multiples of 5 times (base), 4 times (bear), and 6.5 times (bull) concerning US payment and fintech firms to derive FY25 EV, which we discount to FY23 at a 13.4% WACC. Then, as of March 2024e, we increase net cash," it said.