Paytm share price, Vijay Shekhar Sharma: The founder and chief executive officer (CEO) of One97 Communications (Paytm) – Vijay Shekhar Sharma on Monday in a letter to shareholders said that the company is on the right path to profitability and free cash flows with payments service becoming monetizable.

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Sharma in his letter, which also shared Paytm’s performance matrix for the month of October, said that the company is scaling up its lending business which has huge demand in the country.

Digital financial services firm, which was supposedly profitable by FY23-end as estimated by the management, is now eyeing the second quarter of the next fiscal to turn break-even in terms of EBITDA, the management said in its recently conducted concall commentary.

Amid profitability debate and on other metrics, the Zee Business research team has come out with a detailed analysis of the company’s performance as well as its share price. In this, research analyst Nupur Jainkunia is bullish on Paytm, while senior research analyst Varun Dubey is bearish.

Q2 Performance

Bullish View: Paytm has reported improved performance in the July-September quarter of the financial year 2022-23 (Q2FY23), be it on a subscription or loan disbursement parameters. The monthly transacting users’ data saw a 39 per cent rise and commerce and cloud businesses up 55 per cent year-on-year.

Bearish View: The company has reported a loss of Rs 550 loss in the second quarter and in the last nine quarters, it has reported a combined loss of Rs 4500 crore, around 12 per cent of market-cap has been eroded and it may deteriorate further.

Profitability

Bullish View: The company’s EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation) has improved by Rs 260 crore and YoY and Rs 108 crore quarter-on-quarter (QoQ) basis and because of this the loss in Q2 has been narrowed.

Bearish View: The continuously rising competition is a major concern for the company, besides, the regulatory environment for the whole sector is also quite challenging, as it was seen with respect to Paytm Bank.

Valuations and Share Price History

Bullish View: Paytm’s shares are trading at attractive valuations, after a steep correction. The stock is currently trading at 65 per cent lower from its listing price, besides, it is also available at a 30 per cent discount from its competitors, which makes favourble positive point for the stock.

Even global brokerages such as JP Morgan and CITI are bullish on the stock, the former has given an Overweight call with an increased target to Rs 1100 from 1000, while the latter raised its target price to Rs 1055 per share.

Bearish View: The share price is likely to see more correction as the anchor investors' lock-in period of Paytm ends on November 15, 2022. It’s expected that investors are likely to sell the shares, and stock may see more 15 per cent reduction from the current price.

Global brokerage CLSA has given a Sell rating with a target of Rs 650 apiece and Macquarie had also given an Underperformer stance with a target of Rs 450 apiece.

The share price of Paytm on Monday closed marginally higher, up around 0.5 per cent to Rs 635 per share on the BSE. The counter is down over 59 per cent in the last one year and has shown growth of over 7 per cent in the last six months on the BSE.