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Goldman Sachs says Paytm’s current share price is a compelling entry point, ICICI Securities issue Buy rating

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Paytm continues to get the confidence of top brokerages, who are bullish about the companys “immense growth potential”. Goldman Sachs pointed out the strong growth potential for Paytms lending business, saying the firm will hit $10 billion in disbursals by FY26E, vs $900 million in FY22.

Analysts believe Paytm’s ESOP costs will gradually reduce and are currently at par with other listed tech cos in India as well as globally ICICI Securities report said that by FY26, Paytm’s monthly transacting users are likely to double

Paytm, India’s leading digital payments and financial services, continues to get ‘Buy’ calls from top brokerages. After Goldman Sachs, BofA, Morgan Stanley and Dolat Capital, ICICI Securities has also issued a Buy rating for Paytm.

Goldman Sachs had given Paytm a Buy rating, with a target price of Rs 460 on February 7. On Monday, the investment bank reiterated its Buy rating, pointing out key notes for investors. The report said that “the current share price offers a compelling entry point into India’s largest and amongst the fastest growing fintech platforms”.

ICICI Securities has now initiated coverage for Paytm and highlighted the company’s strong growth potential in terms of target addressable market (TAM), giving a “Buy’ rating and target price of Rs 1,362.

Goldman Sachs highlighted that Paytm continues to gain market share across both UPI and non-UPI payments, besides strong growth in lending business. It said Paytm’s net payments take rate or spreads have, defined as revenue less payment processing charges (PPC) as a proportion of Gross Merchandise Value (GMV) have been improving.

“Paytm’s net payments take rate (or spreads, defined as revenue less payment processing charges as a proportion of GMV) have been improving. From 8 bps in 3QFY22, we forecast spreads to widen to 11 bps by FY26E as a result of Paytm’s scale benefits; increasing share of UPI for wallet money addition; rising share of wallet for online payments (vs in-store, which have zero MDR); and rising share of device rental revenues,” the brokerage noted.

Paytm’s ESOP costs to gradually reduce, currently at par with other listed tech cos in India as well as globally.

Goldman Sachs noted that Paytm’s Employee Stock Ownership Plan (ESOP) costs will reduce gradually and is currently at par with other listed tech companies in India as well as globally.

“We forecast ESOP charge for Paytm to be highest (at Rs 3.9 billion per quarter) for first two years (when the first tranche vests, per Paytm), and then gradually reduce over the next three years. Paytm also has about 15 million un-granted options and per our estimate, the total share count could increase by 46 million (or 7 per cent of current outstanding), if all options were to be vested/granted,” said the Goldman Sachs note.

“We note that as a proportion of total operating expenses, Paytm’s ESOP cost is not significantly different vs other global platforms such as Airbnb and DoorDash, as well as recently listed India internet peers such as Zomato and PB Fintech.”

Meanwhile, ICICI Securities in its note called out Paytm’s immense growth potential in terms of target addressable market (TAM), buoyed by its leadership position in India’s digital payments ecosystem.

The brokerage said Paytm’s digital payments business has the potential to grow strongly in future, reflecting its “sizeable two-sided digital ecosystem with proven leadership in payments”.

“Paytm is well ahead in the race of digitisation, building a robust full stack technology suite integrated across the ecosystem with distinct features, high success rates, easy user interface, and customer convenience. It has an early mover advantage in rolling out wallet, FASTag, and is ahead of the curve in (skill based) online gaming, too,” said the note by ICICI Securities.

During the October-December quarter, the company saw its revenues jump by 89 per cent y-o-y to Rs 1,456 crore, EBITDA losses (before ESOP expense) came down to Rs 393 crore from Rs 488 crore during the same quarter in the previous year.

In its latest filing with the stock exchange, Paytm had shared its highest ever growth in monthly transacting users to 68.9 million users. Now, it seems analysts are bullish about this growth momentum to continue. ICICI Securities highlighted that Paytm’s monthly transacting user base (MTUs) is likely to double over FY22-26E to more than 120 million.

Paytm had said that in Q3 FY 22, its merchant payments-led GMV stood at Rs 2.5 lakh crore. Analysts at ICICI Securities forecast that Paytm’s merchant GMV would grow at 36 per cent CAGR over FY22-26E to reach Rs 30 trillion and within this, MDR linked GMV is estimated to grow at more than 25 per cent.

The brokerage noted that Paytm’s contribution margin has potential to further improve 40 per cent-46 per cent by FY24E/FY26E.

“Aided by this contribution margin, there is some visibility of EBITDA getting into positive territory post FY26E. Adjusted EBITDA margin (excluding non-cash ESOP charges) will turn positive by FY26,” it added.

Both Goldman Sachs and ICICI Securities believe that Paytm’s lending business, in which it partners financial institutions to provide loans on its platform, has the potential to grow rapidly in the medium term.

Goldman Sachs said: “We believe Paytm will be able to continue to scale its lending portfolio, and forecast $10 billion in disbursals by FY26E, vs $900 million in FY22. Paytm has continued to add new partners for its lending products over the last few quarters, suggesting to us that lenders are finding value in this partnership.”

Paytm’s lending business witnessed record growth in January 2022, maintaining the positive trend witnessed in the Q3 FY 22 earnings. Last month, Paytm registered 1.9 million loan disbursals, marking a y-o-y growth of 331 per cent; aggregating to a total value of Rs 921 crore (y-o-y growth of 334%). This also included a staggering growth in its Buy Now, Pay Later product – Paytm Postpaid.

“For Paytm’s BNPL product, 30 per cent + of the monthly sign-ups (Dec ’21 quarter) were new-to-credit customers, helping expand the credit base for Paytm’s financial partners. Per Paytm, performance of the company’s loan portfolio has resulted in higher confidence from lenders to increase the scale of this business,” it added.

Meanwhile, ICICI Securities also shared an optimistic outlook about Paytm’s lending business, estimating 18-19 million consumers (15 per cent of MTUs), and an increasing number of merchants to avail lending products through Paytm platform by FY26E.

Sharing a medium-term outlook, it estimated the total lending business revenue to grow at 61 per cent over FY22-26E.

National

J&K Assembly adjourned for three hours as BJP, NC legislators protest

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Jammu, April 9: The Jammu and Kashmir Assembly witnessed pandemonium on Wednesday following which Speaker Abdul Rahim Rather adjourned the House for three hours.

Agitated over the rejection of an adjournment motion notice on unemployment moved by the BJP, party MLAs stormed into the well of the House.

On the other hand, the National Conference (NC) MLAs continued their protest on the Waqf Amendment Act, demanding a discussion.

The Speaker has already firmly ruled out allowing a discussion on the Waqf Amendment Act, holding that the matter is sub judice.

Chaos started as soon as the proceedings of the House commenced for the day, with NC MLAs standing up to insist the Speaker allow discussion on the Waqf law.

Simultaneously, the Speaker disallowed the BJP’s notice for an adjournment motion on unemployment, saying: “I have rejected the adjournment motion as it is not a matter of urgent nature”.

The Speaker’s announcement triggered protests from the BJP legislators, who accused the NC lawmakers of indulging in theatrics. “Yeh Dramabazi Bandh Karo (stop these theatrics)”, the BJP legislators shouted.

Amid protests, NC MLA Nazir Gurezi urged the Speaker to allow discussion on the Waqf law so that they could speak up against the injustice faced by Muslims.

“They want to divide Hindus and Muslims. They should tell people how many jobs they have provided to unemployed youth,” Nazir Gurezi shouted at the protesting BJP MLAs.

Amid protests, the BJP legislators stormed into the well of the House and staged a sit-in there.

The Speaker adjourned the House till 1 p.m.

The speaker has also disallowed a no-confidence motion against him, which the PC leader and MLA, Sajad Gani Lone had brought against him.

The J&K Assembly started its 40-day budget session on March 3 with a recess from March 26 to April 6.

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National

Our lives will be better by following what PM Modi, gurus say: CM Rekha Gupta

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New Delhi, April 9: Delhi Chief Minister Rekha Gupta on Wednesday hailed Prime Minister Narendra Modi’s speech at the Navkar Mahamantra Day event, saying that if one follows what he and spiritual gurus say, then “our lives will be better”.

Addressing the World Navkar Mahamantra Day, CM Gupta said, “We all heard what PM Modi said, and after him, there is nothing left to speak as he beautifully wove sentiments of all people in one thread. If we follow what PM Modi and our Gurus say, assimilating it in our lives will be our ‘bhakti (devotion)’.”

On the occasion, she also complimented the Jain International Trade Organisation (JITO) team for the excellent organisation of the event at 6,000 places across the world parallely and lakhs of people participating in it.

BJP National General Secretary and former MP Anil Jain congratulated the JITO team for the wonderful organisation of the Navkar Mahamantra event.

According to Jain, the event must have increased the enthusiasm in the people across the world and inspired the communities.

Notably, PM Modi, while addressing the event at Vigyan Bhawan in New Delhi, unveiled a set of nine powerful resolutions, ‘Nav Sankalps’, aimed at building a more sustainable, healthy, and prosperous future for the nation.

The nine pledges were saving water, planting ‘Ek ped Maa ke Naam’, dedicated to environmental conservation through afforestation, practicing cleanliness and hygiene as part of the ongoing Swachh Bharat Mission, adopting ‘Vocal for Local’ approach, ‘Desh Darshan’, natural farming, healthier lifestyles, embracing yoga and sports in their daily lives and helping the poor and supporting those in need.

The event, a global initiative, saw participation from people across more than 108 countries, aimed at promoting peace and universal harmony.

The occasion focused on the collective recitation of the revered Navkar Mahamantra, a central tenet of Jainism.

Highlighting the significance of the Navkar Mantra, PM Modi said: “It says believe in yourself. The enemy is not outside, it is inside us. Negative thinking, dishonesty, selfishness, these are the enemies and winning over them is the real victory…”

Navkar Mahamantra Divas precedes Mahavir Jayanti, which falls on April 10 this year.

The festival marks the birth anniversary of Lord Mahavir, the 24th Tirthankara of Jainism, who was born in 615 BC.

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Crime

Pune woman death case: Aaditya Thackeray demands action against Dinanath Mangeshkar Hospital

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Mumbai, April 8: Shiv Sena leader Aaditya Thackeray on Tuesday targeted the Chief Minister Devendra Fadnavis-led MahaYuti government over the death of a pregnant woman, Tanisha Bhise, in Dinanath Mangeshkar Hospital at Pune for alleged denial of treatment after demanding a deposit of Rs 10 lakh.

Aaditya has asked why the government is protecting trust and the hospital and not initiating action despite the inquiry committee citing non-compliance with the stipulated norms.

“Everybody is looking at whether Chief Minister Fadnavis will act against the trust and the agency running the Deenanath Mangeshkar Hospital in Pune that demanded 10 lakh rupees from the woman for delivery. Her inability to pay this ransom led to her demise,” said Aaditya in his post on ‘X’, a day after the consulting obstetrician and gynaecologist Dr Sushrut Ghaisas resigned.

He said that the internal committee denied the charge (of demanding a deposit of Rs 10 lakh by DR Ghaisas), while on Monday, a doctor admitted and resigned from the administration.

“How can Punekars trust such a hospital that speaks two different things to save itself and not the patient? If the hospital was demanding ransom money, what about the hospital’s tax and municipal dues? It’s in crores! Will the agencies go knocking on the doors of the trustees and agencies running this hospital?” he questioned.

Aaditya further asked, “Who is running this hospital and why is it so influential that the Chief Minister has to defend it?”

Dr Ghaisas, who, after a check-up of Tanisha Bhise on a case paper demanded a deposit of Rs 10 lakh, resigned on Monday, citing intense public anger, social media backlash, and threat calls as reasons.

Tanisha Bhise later died at another facility after giving birth to twin daughters.

Dr Dhananjay Kelkar, medical director of the hospital, told reporters: “In his resignation letter, Dr Ghaisas stated that he is under tremendous mental pressure due to public outrage, criticism and threats. He fears this will impact his ability to treat other patients and may also compromise the safety of his family. To avoid injustice to his work, he has decided to resign.”

He said that the hospital administration has forwarded the resignation to its trustees, and it is expected that it will be accepted, adding that Dr Ghaisas will complete his scheduled surgeries and work until Thursday.

Incidentally, the preliminary report prepared by the five-member inquiry committee chaired by Deputy Director Pune Circle Dr Radhakishan Pawar has blamed the hospital for the violation of provisions from the Hospitals Act by not giving primary treatment and later referring the case for further treatment.

The committee was established by the Public Health Department amid protests against the hospital.

According to the committee, the hospital has also violated the provisions of the Bombay Public Trust Act, 1950, which clearly mentions that in an emergency, the Charitable Hospitals must attend to the patient immediately and provide essential medical facilities for all life-saving emergency treatment and procedure, and toll stabilisation.

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