Emkay Upgrades Paytm To ‘Add’, Stock Jumps 4%

Shares of Paytm jumped over 4% in early trading hours today (September 24) after brokerage firm Emkay Global upgraded the stock to ‘add’ from its earlier rating of ‘reduce’, saying the fintech major is on track to achieve profitability on the back of easing regulatory restrictions and cost-cutting measures.

The brokerage firm has raised its price target to INR 750 apiece from INR 375 earlier, which implies an upside potential of over 15% from the stock’s previous close.

Emkay Global expects Paytm’s loan distribution business to gradually reaccelerate and pointed out that its broking and insurance distribution business has already turned profitable.

In the second quarter (Q2) of the financial year 2024-25 (FY25), Paytm sold its “heavy” movies and events ticketing business to foodtech major Zomato, with the move expected to spur cash reserves and reduce net losses in FY25, the brokerage firm said.

With a focus on profitability, Paytm remains open to offload any other non-core assets, Emkay added. It expects the company to again turn operating EBITDA (excluding ESOP and UPI incentive) positive by Q4 FY25.

Following the ratings upgrade, shares of Paytm jumped over 4% to INR 678 apiece on the BSE. The stock has rallied 28% over the past month and is up 68% over the last six months.

Earlier this month, Paytm founder and managing director Vijay Shekhar Sharma reiterated the company’s intention to re-apply for a payment aggregator licence.

The Paytm CEO also reiterated the company’s commitment to focus on its core payment business and cross-selling financial services like loans, mutual funds and insurance products, as it seeks to achieve profitability. In its Q1 FY25 earnings statement, Paytm had said that it is eyeing at least one profitable quarter this fiscal year.

Last month, Paytm received the government’s approval to invest INR 50 Cr in its payments arm, Paytm Payment Services Limited (PPSL).

It is pertinent to mention that Paytm saw its consolidated net loss widen 134% year-on-year to INR 840.1 C in the June quarter (Q1) of the financial year 2024-25 (FY25) as compared to INR 358.4 Cr in the year ago-period.

Revenue from operations also declined 36% in Q1 FY25 to INR 1,502 Cr from INR 2,342 Cr in the corresponding quarter last year.

Paytm’s payment business revenue stood at INR 900 Cr during the quarter under review, which took a hit due to disruption of Paytm Payments Bank products, among other things, the company had said in its Q1 FY25 earnings release.