Yes Securities Upgrades Paytm’s Target Price To INR 700

In its quarterly projections for the fourth quarter of the financial year 2022-23 (Q4FY23), brokerage firm Yes Securities has upgraded listed fintech giant Paytm’s target share price to INR 700 while maintaining a neutral rating for the company.

The brokerage firm projected that Paytm’s Q4FY23 revenue could witness a 57.7% year-on-year (YoY) and 17.8% quarter-on-quarter (QoQ) jump to settle at INR 2,430.3 Cr. Further, the brokerage estimates Paytm to post a net loss of INR 307.3 Cr in the quarter ended March 31, 2023.

Paytm posted a net loss of INR 392 Cr in Q3FY23 against revenue from operations of INR 2,062 Cr. The fintech giant claimed that it turned EBITDA positive, without ESOP cost, after it posted an EBITDA of INR 31 Cr during the quarter ended March 31, 2023.

“With steady loan disbursements and new device addition, we expect Paytm to post healthy sequential growth in revenue,” said Yes Securities in its quarterly report.

Paytm disbursed 4.1 Mn loans worth INR 4,468 Cr in March 2023, registering YoY growth of 63% and 206%, respectively. During FY23, the fintech giant disbursed nearly 40 Mn loans worth INR 35,379 Cr.

Further, the brokerage firm projected an increase of 18% QoQ in Paytm’s revenue from operations, along with an improvement of 63.5% in payment processing charges (PPC) as a proportion of payments revenue, a metric that was 64.0% in Q3FY23.

“We arrive at a total expenses (ex-PPC) growth of 11% QoQ, compared with a de-growth of -3% in 3QFY23, resulting in an EBITDA margin (ex-other income and after ESOP cost) of -10.2%, an improvement of 583 bps QoQ,” Yes Securities stated in its remarks on Paytm.

Interestingly, Yes Securities also projected that the listed fintech giant’s EBITDA margin would go from -21.6% in FY23 (estimated) to -4.2% in FY25 (estimated).

Following the report, Paytm’s shares rallied to an intraday high of INR 661.70, before coming down to INR 655.65 apiece at 3.10 PM on Monday (April 10), about 2% higher than the last close of INR 645.80 apiece.

March was a busy month for Paytm, as it upgraded its tech stack and enabled interoperability of its wallet for UPI transactions. While the former is said to increase the fintech’s tech stack’s scale by 10X, the latter is expected to bring in more revenue for it in interchange fees.

During the same month, the listed fintech received more time from the RBI to reapply for the payment aggregator licence, subject to the Centre’s approval of the investments made by Paytm into Paytm Payments Services Limited (PPSL), a wholly-owned subsidiary of the fintech, which handles the B2B payments business.