Paytm Bleeds As Macquarie's Second Report Puts Rs 1,200 As Target Price

Paytm shares fell for the second trading day after the digital payments company listed on November 18, with its share prices sliding 18 per cent to Rs 1,284 till 12:26 pm IST.

Brokerage firm Macquarie published on Monday a second report on Paytm, maintaining its earlier target price of Rs 1,200 and an ‘underperform’ rating after its first one on listing day ruffled investors.

“Paytm’s valuation---is expensive, especially as profitability should remain elusive for a long time. We recommend UP with TP of Rs 1,200 valuing company at 0.5x PSg on Dec-23 annualised sales,” the report said.

Paytm valued its IPO at Rs 149,000 crore ($20 billion) and has a market capitalisation of around Rs 89,000 crore ($11.2 billion), but has lost about 44 per cent of its value.

The company, in an effort to arrest the slide of its share prices, notified the exchanges on Sunday that its gross merchandise value grew 131 per cent to Rs 83,200 crore ( $11.2 billion) in October on a year on year basis.

Commenting on the numbers, Macquarie said “While GMV has grown 112% YoY, it is dominated by UPI (66 per cent in FY21 as per our estimates), where PayTM earns zero-MDR. We see UPI share climbing up to 85% by FY26E. Hence, we do not see the strong reported GMV growth materially affecting our P&L estimates.”

“For the overall industry, UPI (united payments interface) GMV has growth at 117 per cent in Apr-Oct’21 period, with P2P growing at 105% and P2M at 190%. Hence, Paytm’s strong GMV growth mirrors the industry trend for UPI,” it added.

The company said that its monthly transacting users (MTU) have consistently grown in FY21 and in the first two quarters of FY22, and the trajectory has continued in October 2021 with 63 million MTUs, growth of 35 per cent YoY over the 47 million MTUs in October 2020.

Macquarie’s news report said: “On the downside, Paytm’s loan distribution metrics are much lower than our estimates. Paytm has disbursed loans worth Rs 25bn YTD and the current run-rate for Oct’21 is at Rs 6.3 billion.”

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor