Shares of One 97 Communications Ltd (Paytm) jumped as much as 12% to hit an intraday high of Rs 887.70 on NSE as Founder and CEO Vijay Shekhar Sharma entered into an agreement with Antfin (Netherlands) Holding BV to purchase 10.30% stake in Paytm through his 100% owned overseas entity – Resilient Asset Management B.V. With this, Antfin will cease to be the largest shareholder.
With the latest transaction, Vijay Shekhar Sharma's shareholding in Paytm would increase to 19.42% directly and indirectly, whereas Antfin’s shareholding will reduce to 13.5%. The transaction would be done through an off-market transfer. Paytm is expected to benefit from the new ownership structure, the company said in a release.
According to Paytm's release, Resilient will acquire ownership, and voting rights, of the 10.30% block. In consideration for the acquisition of the 10.30% stake, Resilient will issue Optionally Convertible Debentures (OCDs) to Antfin, which in turn, will allow Antfin to retain economic value of the 10.30% stake, "demonstrating Antfin’s continued confidence in the business potential."
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As per Paytm's press release, no cash payment will be made for this acquisition, and neither will any pledge, guarantee, or other value assurance be provided by Vijay Shekhar Sharma, directly or otherwise. "Pursuant to this transaction, there would be no change in the management or control of Paytm, since Sharma would continue as Managing Director and CEO, and the existing Board would continue as is," it said.
Paytm shares were last trading around 6% up at around Rs 850.15 apiece on NSE. So far this year, the stock has rallied around 60%. However, in the last one year, shares of Paytm have only risen nearly 2%.
Last month, Paytm reported a standalone net loss of Rs 358 crore for Q1FY24, narrower than the net loss of Rs 645 crore in Q1FY23. The company’s revenue jumped 39% YoY to Rs 2,342 crore and its EBITDA before ESOP costs grew to Rs 84 crore as compared to Rs 52 crore in Q4FY23 (excluding UPI incentives) during the quarter under review.
Share market analysts turned bullish on Paytm stock after it posted strong Q1FY24 results. Most of the brokerages were impressed as Paytm’s profitability improved, resulting in another quarter of adjusted EBITDA profit. Analysts raised Paytm’s target price to up to Rs 1,200 apiece.
Brokerage firms such as Citi, and Goldman Sachs see Paytm stock hitting a target price of Rs 1,200 apiece, while JM Financial sees it at Rs 1,060, CLSA foresees it at Rs 1,050, BofA at Rs 1,020, Motilal Oswal at Rs 1,000 apiece and YES Securities at Rs 950. Morgan Stanley has pegged Paytm's target price at Rs 830 per share.
Morgan Stanley has raised the target price on Paytm to Rs 830 apiece on higher EBITDA margin estimates, retaining an 'equal-weight' rating to the stock. The analysts added that the GMV growth continues to be driven by good MTU growth, expansion of the registered merchant base, and increased device penetration.
Analysts at Citi have a 'buy' rating on Paytm stock with a raised target price of Rs 1,200. It says that the net payment margin is on an upswing and ahead of estimates aided by lower interchange expenses. Similarly, Goldman Sachs has increased target price on the company’s stock to Rs 1,200 as analysts see Paytm as not only the fastest growing company within India internet names but also most profitable. Growth trajectory in payments device impresses analysts as they expect FY25 to be the first full year of positive net income
Analysts at Motilal Oswal Financial Services maintained a 'buy' rating on Paytm stock with a target price of Rs 1,000 apiece. The brokerage continues to believe that Paytm will achieve earnings breakeven in FY25. "Paytm reported a largely in-line 1QFY24 with sustained momentum in GMV and robust growth in disbursements. We believe that consistent improvement in contribution margin and operating leverage will continue to drive operating profitability," it added.
YES Securities has upgraded Paytm's rating to 'add' from 'neutral' earlier, and revised the target price upwards to Rs 950 apiece. JM Financial has also upgraded the target price to Rs 1,060 from Rs 855 earlier while maintaining a ‘Buy’ rating on the company’s stock. The brokerage believes that Paytm would be profitable by FY25 driven by its ability to consistently reduce its payment processing charges along with strong ramp-up in lending distribution business.
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