Shares of One97 Communications, the parent company of fintech giant Paytm, continued their downward slide on Friday, May 24, following the release of its March quarter (Q4) results for the financial year 2023-24 (FY24).
Market Performance
Paytm’s stock experienced a significant drop of over 4% during Friday’s trading session, hitting INR 339.00 per share. At 11:00 AM, the shares were trading at INR 340.15, compared to the previous close of INR 356.20.
Financial Results and Net Loss
Paytm reported a net loss of INR 550.5 crore for the March quarter, a substantial increase from the INR 167.5 crore loss recorded in the same period the previous year. This marks an over threefold increase in losses on a year-on-year basis.
Impact of Regulatory Actions
The March quarter results were the first released by Paytm after the Reserve Bank of India (RBI) imposed restrictions on Paytm Payments Bank. The RBI barred the bank from onboarding new users and offering various services, including UPI payments and deposits.
Revenue Decline
Revenue from operations also saw a decline, dropping 2.9% year-on-year to INR 2,267.10 crore from INR 2,334 crore in the corresponding period last year. This represents a 20% decrease from the previous quarter.
Brokerage Revisions and Future Projections
Motilal Oswal has revised its earnings estimates for Paytm, forecasting that the company will achieve EBITDA breakeven by FY26. “We value Paytm based on 15 times FY28E EBITDA and discount the same to FY26E at a discount rate of 15%. We thus value the stock at INR 400, which implies 2.3 times FY26E P/Sales,” stated the brokerage.
Despite the challenging quarter, Paytm is making strategic adjustments aimed at ensuring long-term sustainable growth while adhering to strict governance and compliance standards, according to Motilal Oswal.
Investment Recommendations
Yes Securities has maintained its ‘BUY’ rating on Paytm, albeit with a revised price target of INR 450. “Beyond the business discontinuation impact, the temporary disruption in operations is expected to impact EBITDA by INR 1-1.5 billion in 1QFY25. Additionally, prudent measures taken are likely to result in an incremental EBITDA impact of INR 0.75-1 billion in the same quarter,” the firm noted.
Paytm’s recent performance reflects significant challenges due to regulatory actions and strategic adjustments. However, with brokerage firms providing future earnings estimates and maintaining positive ratings, there is a cautious optimism regarding the company’s long-term prospects.
