Paytm shares jump nearly 9% despite losses widen in Q4; brokerages maintain mixed views –What should investors do?

Paytm share price: Shares of One 97 Communications (Paytm) jumped nearly nine per cent in Monday's intraday trade despite the company saw its losses widening in the quarter ended March 31, 2022. On May 20 closing price of Rs 575 per share, the counter has corrected over 71% against their 52-week high of Rs 1961.05 after discounted listing on the exchanges last year.

Despite widening loss, the stock jumped on Monday after digital payments firm said that it expects the issue of RBI ban on its subsidiary Paytm Payments Bank to onboard new customers would be resolved in 3-5 months after the clearance by the banking regulator to the processes being put in place, as per news agency PTI. 

The Reserve Bank of India (RBI) in March had barred Paytm Payments Bank from onboarding new customers, citing material supervisory concerns observed at the bank.  

Meanwhile, brokerages manitianed mixed stance on Paytm.  

Brokerage firm ICICI Securities maintained a buy rating with a target price of Rs 1285. This turns out to be an upside of 123% on Friday's closing price of Rs 575 per share and 119 from today's high of Rs 629.95 per share.  

Backing Management confidence of achieving operating profitability (positive EBITDA before ESOP cost) by Q2FY24 on the back of improving contribution margins and decreasing indirect expenses as a percentage of operating revenues, it remained conservative and expect the company to be EBITDA-positive by FY25E. "Maintain BUY with an unchanged target price of Rs1,285 based on customer lifetime value methodology," it added.  

Maintaining buy calls, Goldman Sachs revised its target price marginally from Rs 1060 per share to Rs 1070. It was of the view that March earnings witnessed yet another quarter of strong and improving monetisation of payments vertical and growth momentum for financial services and cloud business robust. 

Macquarie, however, retained an Underperform rating with a target price of Rs 450 per share. On Friday it closed at about Rs 573 per share levels. As per the brokerage, the company could take 12 quarters for EBITDA losses to break even as profitability is still an uphill battle. 

Meanwhile, Yes Securities maintained a 'Reduce' call on the digital payments firm stock with a target price of Rs 580. It observed that Improvement in revenue from operations was driven by payment services to merchants and financial Services and Sequential improvement in Contribution profit margin was driven mainly by controlling Payment Processing Charges 

Earlier, Paytm on Saturday reported a widening of its consolidated loss to Rs 761.4 crore for the quarter ended March 2022. 

"The company posted a loss of Rs 441.8 crore in the same period a year ago. The losses, however, narrowed on a sequential basis. Its consolidated loss stood at Rs 778.4 crore in the quarter ended December 2021," Paytm said in a regulatory filing. 

The revenue from operations of One97 Communications (OCL), however, jumped by about 89 per cent to Rs 1,540.9 crore during the quarter from Rs 815.3 crore in the year-ago period.