Paytm shares: One97 Communications fell more than 3.31 percent to Rs 444.30 on Monday, bringing its total market capitalization below Rs 29,000 crore.
Shares of One97 Communications, the parent company of fintech player Paytm, fell another 3% during the trading session on Monday, continuing its weakness following the release of June 2024 quarter earnings on Friday, July 19. However, following the quarterly earnings, brokerage companies have a mixed outlook on the stock.
On Monday, shares of One97 Communications Ltd fell more than 3.31 percent to Rs 444.30, bringing the company’s total market capitalization below Rs 29,000 crore. The scrip closed at Rs 458.70 crore in the previous trading session on Friday.
Q1FY25 Financials
In Q1FY25, One97 Communications reported a significant increase in consolidated net loss, which rose 2.5 times to Rs 839 crore from Rs 357 crore the previous year. This loss was also up by 50% from Rs 550 crore in the March 2024 quarter. Revenue from operations fell by 36% year on year to Rs 1,502 crore, down from Rs 2,342 crore the previous year. Paytm reported an EBITDA before ESOP loss of Rs 545 crore for the quarter.
One 97 Communications’ consolidated net loss increased two-and-a-half times to Rs 839 crore in Q1FY25 from Rs 357 crore the previous year, as the company grappled with the impact of the RBI’s limits on the payments bank operations. Sequentially, the loss increased by 50% from Rs 550 crore in the March 2024 quarter.
One97 Communications’ Stock Performance
Shares of One97 Communications, the parent company of fintech player Paytm, dropped more than 3.31% to Rs 444.30 on Monday. This decline brought the company’s total market capitalization below Rs 29,000 crore, down from Rs 458.70 crore at the close of the previous trading session on Friday, July 19.
The fintech firm’s revenue from operations fell 36% year on year (YoY) to Rs 1,502 crore in the quarter ended June 30, 2024, compared to Rs 2,342 crore in the previous year. Paytm reported an EBITDA before ESOP loss of Rs 545 crore for the reported quarter.
Paytm aims to achieve quarterly profitability this fiscal year. This profitability is based on EBITDA before ESOP and excludes the UPI incentive. The corporation is nearing completion of its move to other banks. Once this is completed, it can be submitted to the NPCI for approval to add customers. According to YES Securities, this should take place during the current financial year.
Revenue from payment services to consumers was down 85% year on year, revenue from payment services to merchants was down 4.9% year on year, and income from financial services was down 46% year on year, according to the report. “We maintain a recently-assigned ‘buy’ rating on Paytm with a revised price target of Rs 550, valuing it at 3.3 times FY26 P/S to arrive at the target,” the report continues.
Paytm reported a net loss due to a steep decrease in income, a slower payout rate, and somewhat higher indirect expenses. Motilal Oswal reported that income from payment services to consumers fell 85 percent year on year, while merchant revenue fell marginally. Total revenue decreased by 36%, while GMV increased by 5% YoY, which was consistent, according to the report.
“The net payment margin fell by 41 percent, resulting in a contribution margin of 50.3%. “We have revised our contribution profit forecasts down by 8% for FY25 and 3% for FY26, and anticipate that Paytm will achieve EBITDA positivity by FY27,” it stated, keeping a ‘neutral’ rating on the stock with a target price of Rs 500.
Paytm posted 1Q25 earnings that were lackluster but expected. Ebitda fell as the impact of disruptions was felt throughout the quarter. According to JM Financial, the decrease in revenue was mostly attributable to a shift from payment services to financial services revenue, as the value of loans given decreased even as disbursements in merchant loans increased.
“Net payment margin decreased by 9 basis points due to the effect on high-margin products and a temporary disruption in operational metrics. “We believe that acquiring new customers and revitalizing high-margin products in the payments sector hinges on regulatory approvals, effective account migration, and smooth integration,” it noted, maintaining a ‘sell’ rating and reducing the target price to Rs 390.
Bernstein maintains an ‘outperform’ rating with a target price of Rs 600, while Jefferies maintains a ‘hold’ rating with a target price of Rs 420. Macquarie has maintained an ‘underperform’ rating on Paytm with a target price of Rs 325 per share.
