30 September 2024
Paytm's prospects for recovery are looking brighter as it navigates through regulatory challenges and maintains a stable base of merchants. The digital payments giant has managed to retain its merchant base of around 41 million while transitioning its user base to new partner banks. This shift positions Paytm to receive long-awaited approvals from the National Payments Corporation of India (NPCI) to onboard new users. Additionally, recent approval from the Foreign Investment Promotion Board (FIPB) enhances the likelihood of securing a Payment Aggregator license from the Reserve Bank of India (RBI), which will protect its online merchant business.
Emkay Global Financial Services mentioned that while Paytm's postpaid loan distribution business remains on hold, the company's merchant lending segment is gaining traction and is expected to become a key growth driver. New products like mortgage and gold loans, currently in the beta phase, are anticipated to gather momentum.
Paytm has revised its payment gross merchandise value (GMV) and operational revenue growth forecasts to a compound annual growth rate (CAGR) of 31% and 22% respectively over FY 25-28, up from earlier projections of 25% and 18%. The company is also undergoing significant cost optimization efforts, to achieve positive operating EBITDA by the fourth quarter of FY25.
The company's cost-cutting measures, alongside improved performance in its broking and lending businesses, are expected to further reduce its operational expenses as a percentage of revenue, paving the way for Paytm to achieve profitability by FY 27. In light of these positive developments, Emkay Global has upgraded Paytm to an 'ADD' rating and raised its target price to Rs 750 per share from Rs 375.
However, Paytm's further re-rating will depend on how quickly it can recover lost consumer metrics, revive its lending business, and avoid additional regulatory disruptions.
Paytm's prospects for recovery are looking brighter as it navigates through regulatory challenges and maintains a stable base of merchants. The digital payments giant has managed to retain its merchant base of around 41 million while transitioning its user base to new partner banks. This shift positions Paytm to receive long-awaited approvals from the National Payments Corporation of India (NPCI) to onboard new users. Additionally, recent approval from the Foreign Investment Promotion Board (FIPB) enhances the likelihood of securing a Payment Aggregator license from the Reserve Bank of India (RBI), which will protect its online merchant business.
Emkay Global Financial Services mentioned that while Paytm's postpaid loan distribution business remains on hold, the company's merchant lending segment is gaining traction and is expected to become a key growth driver. New products like mortgage and gold loans, currently in the beta phase, are anticipated to gather momentum.
Paytm has revised its payment gross merchandise value (GMV) and operational revenue growth forecasts to a compound annual growth rate (CAGR) of 31% and 22% respectively over FY 25-28, up from earlier projections of 25% and 18%. The company is also undergoing significant cost optimization efforts, to achieve positive operating EBITDA by the fourth quarter of FY25.
The company's cost-cutting measures, alongside improved performance in its broking and lending businesses, are expected to further reduce its operational expenses as a percentage of revenue, paving the way for Paytm to achieve profitability by FY 27. In light of these positive developments, Emkay Global has upgraded Paytm to an 'ADD' rating and raised its target price to Rs 750 per share from Rs 375.
However, Paytm's further re-rating will depend on how quickly it can recover lost consumer metrics, revive its lending business, and avoid additional regulatory disruptions.
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