Following a tumultuous period marked by a significant downturn in its share value last week, fintech giant Paytm saw a remarkable recovery on Monday (May 27), with its shares surging by 4.6% on the BSE.
Recovery Amid Turbulence
The stock exhibited a robust performance during intraday trading, climbing as high as 4.9% to reach INR 357.95 before settling at INR 356.55 by the end of the trading session. This resurgence comes in the wake of a sharp decline in the preceding week attributed to the company’s disappointing Q4 FY24 results.
Q4 Performance and Regulatory Challenges
Paytm’s net loss expanded by over three times year-on-year to INR 550.5 Cr in Q4 FY24, while its operating revenue experienced a 2.9% decline to INR 2,267.10 Cr. Regulatory issues, including disruptions related to the UPI transition and RBI’s embargo on Paytm Payments Bank Limited (PPBL), contributed to this downturn.
Recovery Outlook and Cost Reduction Measures
Despite these challenges, Paytm anticipates significant improvements from Q2 FY25 onwards. The company has also implemented cost-cutting measures, including a workforce reduction of about 5,000-6,300 employees, as part of an employee cost-saving plan aimed at INR 400-500 Cr.
Strategic Adjustments
In response to regulatory hurdles, Paytm General Insurance Ltd (PGIL) withdrew its general insurance license application, redirecting its focus towards insurance distribution through its subsidiary Paytm Insurance Broking Private Ltd (PIBL).
Analyst Perspectives
Analysts’ views on Paytm remain divided, with some expressing caution while others remain optimistic about the company’s prospects. Brokerages such as JM Financial and Emkay Research maintain a ‘sell’ or ‘reduce’ rating, citing concerns over regulatory challenges and business disruption. Conversely, Yes Securities reiterated a ‘buy’ stance, signaling confidence in the company’s recovery trajectory.
Market Outlook
Despite recent setbacks, the average price target (PT) for Paytm shares among analysts stands at INR 484.53. The company’s shares have experienced a significant decline year-to-date, underscoring the challenges it faces in navigating regulatory complexities and restoring investor confidence.
