Paytm, the leading digital payments platform in India, has reached a 52-week high on the back of strong growth in its lending and digital payments businesses. The company’s share price rose nearly 3% to hit a fresh high of ₹931 in morning trade on Thursday.
Over the past six months, Paytm’s stock has surged by almost 49%, outperforming the equity barometer Sensex, which has gained only 11% in the same period. This strong performance has attracted the attention of foreign brokerage firm Bernstein, which recently initiated coverage on Paytm with an ‘outperform’ rating. Bernstein has set a 12-month target price of ₹1,100 for the company.
Bernstein believes that Paytm is well-positioned to benefit from the disruption in the digital lending space, thanks to its dominant payments platform and early entry into digital credit products. The firm expects Paytm’s lending business to continue its strong growth, with a nearly 50% compound annual growth rate (CAGR) between fiscal years 2023 and 2030. It anticipates that Paytm will achieve a market share of almost 4% in the high-yield household lending segment by fiscal year 2026, with interest rates of over 13%. Furthermore, Bernstein expects Paytm’s payments segment to break even by fiscal year 2025 and generate earnings per share of around ₹130 by fiscal year 2030.
While Bernstein is optimistic about Paytm’s prospects, it also acknowledges that the digital lending space is still evolving and that any adverse regulatory changes could pose a downside risk for the company.
Paytm has been expanding its consumer base, with an average monthly transacting user (MTU) exceeding 92 million at the end of the June quarter. The company’s management believes that India has the potential for at least 100 million merchants and over 500 million payment users in the near future.
In addition to its focus on digital payments and lending, Paytm is also investing in artificial intelligence (AI). The company aims to build an artificial general intelligence software stack and has highlighted its intent to enhance its AI capabilities and other technologies, according to its annual report for fiscal year 2022-2023.
Foreign portfolio investors (FPIs) have also shown confidence in Paytm, with data indicating that FPIs increased their stake in One97 Communications, the parent company of Paytm, to 16.86% at the end of June 2023, up from 5.45% in June 2022.
Paytm reported its financial results for the April-June quarter of fiscal year 2023-2024 last month. The company recorded a consolidated net loss of ₹357 crore, significantly narrower than the loss of ₹6,444 crore reported in the same period last year. However, the net loss widened compared to the preceding quarter of fiscal year 2022-2023, which stood at ₹168 crore.
Overall, Paytm’s strong growth in lending and digital payments, along with its expanding consumer base and investments in AI, have contributed to its recent stock price surge and the attainment of a fresh 52-week high. As the company continues to navigate the evolving digital lending landscape and regulatory environment, investors and industry observers will closely monitor its performance and future growth prospects.
