26 August 2024
Shares of One 97 Communications, the parent company of Paytm, surged following the company's deal with Zomato, in which Paytm sold its entertainment business for ₹2,048 crore. This sale is expected to strengthen Paytm's balance sheet, significantly boosting its cash reserves. The increased liquidity is anticipated to allow Paytm to sharpen its focus on its core payment and financial services.
Analysts believe that the enhanced cash flow could be used to expand Paytm's rewards and cashback programs, essential for revitalizing its payment business amidst regulatory challenges. Beyond the immediate financial benefits of the sale, market participants are also watching for additional catalysts that could affect Paytm's stock price. One such potential trigger is the anticipated government approval for foreign direct investment (FDI) in payment aggregators, which could open up new growth avenues for Paytm and possibly lead to further stock price appreciation.
Global brokerage CLSA has raised its target price for Paytm from ₹480 to ₹530 while maintaining a "Hold" rating. Citi has also increased its target price from ₹410 to ₹440, though it continues to issue a "Sell" rating. These adjustments reflect the optimistic outlook following the sale and its positive impact on Paytm's financials. CLSA has revised its FY26-27 adjusted PAT estimates upward by 12% for FY27 due to expected interest income from the transaction. Citi also views the sale favorably and notes that the next significant catalyst for Paytm could be government approval for FDI in payment aggregators.
The recent sale has led to a rally of around 16% in Paytm's stock price over the past two weeks. Moving forward, the market will closely watch developments related to FDI policies and Paytm's strategic investments and performance in its core business areas.
Shares of One 97 Communications, the parent company of Paytm, surged following the company's deal with Zomato, in which Paytm sold its entertainment business for ₹2,048 crore. This sale is expected to strengthen Paytm's balance sheet, significantly boosting its cash reserves. The increased liquidity is anticipated to allow Paytm to sharpen its focus on its core payment and financial services.
Analysts believe that the enhanced cash flow could be used to expand Paytm's rewards and cashback programs, essential for revitalizing its payment business amidst regulatory challenges. Beyond the immediate financial benefits of the sale, market participants are also watching for additional catalysts that could affect Paytm's stock price. One such potential trigger is the anticipated government approval for foreign direct investment (FDI) in payment aggregators, which could open up new growth avenues for Paytm and possibly lead to further stock price appreciation.
Global brokerage CLSA has raised its target price for Paytm from ₹480 to ₹530 while maintaining a "Hold" rating. Citi has also increased its target price from ₹410 to ₹440, though it continues to issue a "Sell" rating. These adjustments reflect the optimistic outlook following the sale and its positive impact on Paytm's financials. CLSA has revised its FY26-27 adjusted PAT estimates upward by 12% for FY27 due to expected interest income from the transaction. Citi also views the sale favorably and notes that the next significant catalyst for Paytm could be government approval for FDI in payment aggregators.
The recent sale has led to a rally of around 16% in Paytm's stock price over the past two weeks. Moving forward, the market will closely watch developments related to FDI policies and Paytm's strategic investments and performance in its core business areas.
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