Paytm, India’s leading digital payments platform, recently reported its first-ever profit, marking a significant milestone in its journey. This achievement comes after years of consistent investments in technology, user acquisition, and operational growth.
Key factors such as increased revenue from financial services, robust growth in merchant subscriptions, and a focus on cost efficiency played a crucial role in driving the company toward profitability.
Price Movement
Paytm, operated by One 97 Communications Ltd, debuted on stock exchanges on November 18, 2021, following one of India’s largest IPOs, which raised around Rs.18,300 crore. The shares, priced at Rs.2080–2150 per share during the IPO, opened lower at Rs.1950 per share on the NSE and Rs.1955 apiece on the BSE.
Since its listing at Rs.1950, Paytm’s shares faced a steady decline, hitting an all-time low of Rs.317.4 each. However, with improved revenues and achieving profitability, the stock has rebounded significantly, trading at Rs.900.45 as of November 29.
Key Factors driving stock
One of the key reasons behind Paytm’s profitability for the first time is the sale of its movie and event ticketing businesses to Zomato for Rs.2013.6 crore.
This transaction generated a significant exceptional gain of Rs.1345 crore, which contributed heavily to Paytm’s reported profit of Rs.930 crore in Q2 FY25. Without this deal, Paytm would have posted a net loss of approximately Rs.415 crore for the quarter, underlining the crucial role of this divestment in its financial turnaround.
In addition to the exceptional gain from the business divestment, several factors contributed to Paytm’s first-ever profit in Q2 FY25. Paytm’s revenue for Q2 FY25 stood at Rs.1,660 crore, showing strong growth despite challenges. This was driven by the continued expansion in its digital payments and financial services segments, particularly the growth in loan distribution.
Paytm’s loan distribution business grew by 29 percent YoY, facilitating Rs.7,560 crore worth of loans. The company also reduced operating expenses by 8 percent YoY, focusing on cost optimization.
Furthermore, Paytm’s Monthly Transacting Users (MTUs) rose to 114 million, boosting transaction-based revenues. These combined efforts, along with a stronger customer base, helped Paytm achieve profitability.
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Target Recommendation
UBS and Bernstein raised their target price for Paytm to Rs.1,000, maintaining a ‘Neutral’ stance. From Paytm’s current price of Rs.934.50, this represents an upside potential of approximately 7.03 percent. Both brokerages expect revenue-driven growth but foresee limited impact from further cost optimization.
Future Outlook
Paytm is positioning itself for substantial growth, focusing on international expansion with UPI initiatives in markets like the UAE and Singapore.
The company plans to boost payment margins through enhanced digital wallet services and the growing Buy Now, Pay Later (BNPL) segment. Analysts expect Paytm to achieve profitability by 2027, driven by strategic partnerships and ongoing operational improvements.
Financial Performance
Turning towards the financials of the company, One 97 Communications Ltd reported Q2 FY25 revenue of Rs.1,660 crore, falling 34 percent from Rs.2,519 crore in Q2 FY24. Profit After Tax (PAT) increased substantially to Rs.930 crore, compared to a net loss of Rs.292 crore in the same period.
Written by – Siddesh S Raskar
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