Paytm shares under pressure ahead of Q3 results — what should investors do?

Paytm parent One97 Communications' shares faced selling pressure on Friday, ahead of the digital payment company's quarterly financial results due later in the day. The stock declined by as much as Rs 22.8 or 4.2 per cent to hit Rs 523 during the session before settling at Rs 524.9 apiece on BSE. 

At the current level, Paytm shares are available at a discount of 75.6 per cent to the upper end of its IPO price range. However, in some respite for investors, the stock is 19.4 per cent above its all-time low of Rs 439.6 apiece, hit on November 24 last year. 

In a business update for the quarter ended December 2023, released last month, Paytm reported growth of 38 per cent in its gross merchant volume to Rs 3.46 lakh crore ($42 billion), and said its loan disbursals surged 330 per cent to Rs 3,665 crore ($443 million). 

Paytm shares have failed to visit the issue price in the secondary market since the digital payments firm's IPO in November 2021.

Paytm's IPO — one of the country's largest share sales ever — saw an overall subscription of 1.9 times the shares on offer, lesser than the majority of primary market offerings in the bumper year 2022. 

Should you buy, hold or sell Paytm shares?

"There is a lot of hope of revenue going up and losses narrowing but one would have to wait and see about the timeline when it comes into black, and its commentary going forward... Technically speaking, the stock seems to be going nowhere," Hemen Kapadia of KRChoksey told Zeebiz.com. 

Earlier this year, Zee Managing Editor Anil Singhvi pointed out that the low hit in November 2022 can be considered a bottom for now. This is somewhat an indication of the worst downside for the stock for now, he said.

Those having Paytm in their portfolio can continue to hold on to the stock for now, he said.

In December 2022, Paytm announced a share buyback scheme worth Rs 850 crore at Rs 810 apiece, a 62.3 per cent discount to the issue price, and said it expected the process to be completed within six months.

The digital payments firm is yet to turn profitable. It aims to be operationally profitable by September 2023.

"The founder had specified about being EBITDA-positive by september 2023 and this is important on terms of reliability of the management amidst the ongoing buyback," Kapadia added.

ALSO READ: From Paytm to Zomato to Nykaa: Should investors grab new-age stocks on steep falls?

In a research report on Paytm released in December 2022, ICICI Securities highlighted three key risks for Paytm:

• Slower than anticipated scale up in financial services revenue
• Pressure on take rate in lending business
• Slower growth in gross merchandise value (GMV)

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