Paytm shares soar over 12% amid high volumes
At 2:47 p.m., the stock was trading 11.4% higher at Rs 618. Paytm shares also surged 16% in the past two days after the company received approval from the finance ministry to invest in its payment services business.
After this approval, the payment services business, Paytm Payments Services Limited (PPSL), will resubmit the application for its payment aggregator license.
“We would like to inform you that PPSL has received approval from the Government of India, Ministry of Finance, Department of Financial Services, vide its letter dated August 27, 2024, for downstream investment from the Company into PPSL. With this approval in place, PPSL will proceed to resubmit its PA application. In the meantime, PPSL will continue to provide online payment aggregation services to existing partners,” said the company in a filing to the exchanges on Wednesday.
One 97 Communications, which operates Paytm, has been under the scrutiny of India’s banking regulator and financial crime-fighting agency after the central bank ordered it to wind down its payments bank in January.With the latest approval, the company will resubmit an application with the ministry to regain a license for its payments services business, Paytm said.Meanwhile, brokerage firm Ventura Securities also initiated coverage on Paytm with a ‘Buy’ rating and given a target of Rs 1,170 a share, up 111% from the previous day’s closing price of Rs 554 apiece.Despite the RBI’s restrictions on its associate Paytm Payment Bank (PPBL), Ventura Securities believes Paytm’s business model is robust, and its technology is top-notch.
With a pan-India merchant base of 40.7 million and 78 million monthly transacting users (MTUs), Paytm has a strong foundation for recurring revenue. The growing popularity of UPI as a preferred digital payment method and the widespread use of Paytm’s soundbox (+POS) further position the company to capitalize on these trends, Ventura added.
The report forecasts that over FY24-27E, Paytm’s revenue, contribution profit, and pre-ESOP EBITDA will grow at CAGRs of 14.1%, 15.6%, and 54.5%, respectively, reaching Rs 14,531 crore, Rs 8,301 crore, and Rs 1,829 crore by FY27E. Additionally, post-ESOP EBITDA and net earnings are expected to turn profitable, with projections of Rs 1,379 crore and Rs 1,388 crore by FY27E, compared to losses of Rs 908 crore and Rs 1,417 crore in FY24.
Ventura anticipates this growth will be driven by GMV (payment services and devices) reaching Rs 32.1 trillion (21.9% CAGR), over 4X growth in loan disbursals, and doubling revenues from marketing services (ticketing, vouchers, etc., excluding businesses sold to Zomato). Discontinued services such as Paytm Wallet, FASTag, BNPL, and house rental payments are expected to resume once the RBI restrictions are lifted.
(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times)
