Paytm Runs With The Bull, Witnesses 64% Upside So Far This Year

It was the morbid winter of 2022, and the underwhelming performance of new-age tech stocks dissuaded most Indian startups from listing on the bourses, fearing retail investors’ cautious stance against investing in loss-making ventures.

During this time, the operations of the poster child of India’s fintech growth story, Paytm, too, were roiling in uncertain waters amid global volatilities and economic uncertainties. Adding to its troubles, the stock of the fintech juggernaut had already lost a majority 75% of its value by the end of November 2022. 

Such was the meltdown that an international publication termed Paytm stock’s downward spiral in mid to large-cap IPOs as the ‘world’s biggest single-year loss’ of the decade since their respective listings.

Brokerages were panning the company while an institutional advisory firm demanded the ouster of CEO and cofounder Vijay Shekhar Sharma. Nothing was going right, but the tides suddenly changed.

Six months on, Paytm has been on an upswing, gaining 64% on the BSE and has already added $2 Bn to its market cap. 

Further, in the last three months, Paytm stock has grown nearly 50% on the BSE and climbed 23% since May 22, thanks to the improving investor sentiment, and the company’s seriousness towards improving its operational metrics.

So, How Exactly Paytm Changed Course?

By the end of December 2022, Paytm CEO Vijay Shekhar Sharma said that the company would steer clear of any further cash burns and focus on boosting operational profitability. 

Back then, Sharma reassured his investors that it would turn cash flow positive in the next 12-18 months. Despite this, the pre-IPO investors were fleeing in droves while retail investors were dumping the stock, fearing uncertainties, and a further bloodbath of the stock on the bourses. 

Then came some respite, and, in February 2023, Paytm released its quarterly results, announcing that it had halved its losses year-on-year in the third-quarter (Q3) of financial year 2022-23 (FY23).

Unexpectedly, the fintech juggernaut emerged EBITDA positive, sans ESOPs, in the quarter ended December 2022, ditching its March 2023 projections. Further, all key operational metrics also saw hefty growth during the quarter. 

Moving on, the windfall was the government’s announcement of an INR 2,600 Cr subsidy for the fintech sector, a shot in the arm for the digital payments company, many may argue.

This made for an upward spiral and the trend continued into the fintech’s last quarter of FY23. Piggybacking on these key factors, Paytm was able to slash its losses 78% YoY to INR 167.5 Cr and further scale its revenues 51% YoY to INR 2,334.5 Cr in Q4 FY23. 

Meanwhile, Paytm focussed on growth synergies, along with quality revenues, keeping its profitability metrics at the fore.

The endeavours started bearing fruits and the company’s lending vertical emerged as the crown jewel, which, as per many brokerages, would continue to be the key driver of growth for the fintech giant in the times to come. 

Paytm’s loan disbursals volume jumped 253% YoY to INR 12,554 Cr in Q4 FY23 while the number of loans surged 82% YoY to 1.2 Cr.

It also embarked on introducing a slew of new offerings, streamlined its operations and effectively monetised its payments vertical through Soundbox, inviting thumbs up from brokerage firms like Goldman Sachs, Yes Securities, and Macquarie, among others.

Alongside, the spell of good news reinstated investor confidence, and retail investors began loading up on the stock. 

However, at the time when everything seems to be in full bloom, much may be at stake for Paytm due to rising competition from its peers like PhonePe, who are flushed with investors’ uncontested backing in terms of capital support. It is examples like these that could potentially generate headwinds for Paytm. 

While Paytm has curbed its losses drastically, regulatory challenges still seem to be another headache for the fintech giant. However, for now, the company appears to be religiously chalking out its growth path towards a sustainable business model, shushing many who had earlier questioned Sharma’s vision of creating a $100 Bn tech company.