Paytm - Finally a good news for Investors

Paytm
Share

Towards the start of the year, Macquarie cut the target price of Paytm Share and had given a target price of Rs 900 per share. The stock was trading at Rs 1200 back then. The Paytm stock is continuously going south, and today has touched its all-time low of Rs 813.50.

However, finally, there is some good news for the Paytm investors. Two big brokerage firms have given a BUY call with higher targets. Let us look at the details:

Goldman Sachs

Below are some of the updates given by Goldman Sachs on Paytm's business:

Take Rate - Take rate is the percentage of the gross merchandise value (GMV) that Paytm records as its revenues. The company reported a take rate of 0.4% in the December quarter, marginally higher than the September quarter's take rate of 0.39%. It is the first instance since FY19 that the take rate has marginally moved up.

ESOP Updates - Paytm reported ESOP charges of about Rs 390 crore in the December quarter compared with about Rs 20 crore in the September quarter. Goldman Sachs said such ESOP charges made up 47% of Paytm’s total employee expenses and were equivalent to 27% of revenues.

Lending business - The brokerage firm believes that Paytm's scale in payments results in its lending data quality being superior to peers, resulting in more customized products, lower loan losses for partners, and better collection ability.

The four key catalysts given the Goldman Sachs are:

  1. Continued market share gains in digital payments.
  2. Removal of regulatory overhang on MDR and benefit from the potential interchange on wallets.
  3. Faster than expected scale-up of the lending business, resulting in an improving profit profile.
  4. Approval for the Raheja QBE transaction and an SFB (small finance bank) license.

Target Price - Goldman's has given a target price of Rs 1,460 suggests a 75% potential upside for the share price. It said - they see risk-reward for Paytm as skewed to the upside, with 151% upside in the bull case vs 2% downside in the bear case.

ICICI Securities

Below are updates from ICICI Securities:

Business Value - ICICI Securities has forecasted the intrinsic business value of Paytm at about Rs 94,000 crore. That, on a lifetime customer value of Rs 2,000 from every monthly transacting user and Rs 29,600 per merchant.

Growth in coming years - It expects Paytm’s merchant GMV to grow at an annual rate of more than 36% over FY22-26. It expects the company’s cloud business and e-commerce offerings to grow at over 30% CAGR till FY26, while the financial services arm’s revenue to grow at 57%.

The key triggers as per ICICI Securities are:

  • Paytm's ability to monetize UPI that constitutes half of Paytm's GMV can swing earnings.
  • Paytm will benefit and enhance the engagement of customers on its platform with a market share cap for leaders in UPI transactions.
  • Wallet interoperability will benefit the category leader in the form of interchange, Paytm may end up earning interchange fees to the tune of 30-50 basis points.

Target Price - The brokerage firm has set a target price of Rs 1,352 for Paytm's share, a 66% upside from its current level.

Share: