Paytm Shares Jump 4.6% After A Sharp Slump Last Week

After a sharp correction in two consecutive sessions last week following its poor Q4 FY24 show, shares of fintech major Paytm made a strong comeback on Monday (May 27) by gaining 4.6% on the BSE.

The stock jumped as much as 4.9% during the intraday trading to touch INR 357.95 on the BSE. However, it ended the day’s trading at INR 356.55.

It must be noted that hurt by the regulatory issues, Paytm’s net loss widened over 3X on a year-on-year (YoY) basis to INR 550.5 Cr in Q4 FY24. Its operating revenue also declined 2.9% YoY to INR 2,267.10 Cr during the quarter.

The company acknowledged that its Q4 FY 2024 results were impacted due to the temporary disruption on account of UPI transition and permanent disruption because of the RBI’s embargo on Paytm Payments Bank Limited (PPBL).

In fact, Paytm’s monthly transacting users fell 24% in April compared to January this year due to the pause in new user sign-ups for the TPAP app and voluntary user attrition on the back of the RBI’s action.

However, Paytm said it expects to see meaningful improvement from Q2 FY25. Amid the regulatory troubles, the Vijay Shekhar Sharma-led company also announced cost-cutting measures, which would include employee layoffs.

Paytm has initiated an employee cost-saving plan of INR 400-500 Cr, which is expected to result in a workforce reduction of about 5,000-6,300 people.

The company’s shares fell 7.6% in the last two trading sessions of the previous week.

Meanwhile, Paytm, in an exchange filing on Saturday (May 25), said that Paytm General Insurance Ltd (PGIL) was withdrawing its general insurance licence application. Instead, it has intensified its focus to distribute insurance through its wholly-owned subsidiary Paytm Insurance Broking Private Ltd (PIBL). 

The brokerages remained divided on the stock post its Q4 earnings. Of the 17 analysts covering Paytm, four have ‘buy’ or higher rating, six recommend ‘hold’, while the rest have a ‘sell’ call.

Brokerage JM Financial maintained its ‘sell’ rating and price target (PT) of INR 300 on Paytm following its Q4 results. 

“Although Paytm has found alternatives for PPBL, we believe onboarding of new customers and revival of high margin products in payments business is contingent on regulatory approvals, seamless migration of accounts and smooth integration,” said the brokerage. “We remain watchful as Paytm tries to drive higher volumes to set-off the potential loss in revenue.”

Emkay Research also reiterated its ‘reduce’ rating and a PT of INR 300 on the stock.

“We expect Paytm to witness significant business disruption in FY25, and recuperation to begin gradually thereafter, subject to no further business/regulatory hurdles,” the brokerage said. 

Factoring in the business slowdown, lower take rates in payment and lending businesses, and higher operational burn, Emkay expects Paytm to turn net profit-positive only by FY29.

Meanwhile, Yes Securities reiterated its ‘buy’ stance on the stock with a PT of INR 450, saying that its ‘repair process begins’ from here on.

The brokerages covering the stock together have an average PT of INR 484.53 on Paytm. The company’s shares have almost halved year to date.