Paytm drops 3% after Q4 loss broadens; check trading strategy here

The decline followed the company's announcement of its Q4 results, which fell short of market expectations. Paytm's loss widened to Rs 549.6 crore in Q4FY24

Paytm Q4 analysis: Paytm, the digital payments giant operated by One 97 Communications, saw its shares drop by as much as 2.67 per cent, hitting an intraday low of Rs 359 per share on the BSE on Thursday. 

The decline followed the company's announcement of its Q4 results, which fell short of market expectations. Paytm’s loss widened to Rs 549.6 crore for the quarter ending March 31 of financial year 2024, compared to a net loss of Rs 219.8 crore in the same quarter a year ago.

The company's topline (revenue) also dropped 2.9 per cent year-on-year to Rs 2,267.1 crore. 

At the operating level, earnings before interest, taxes, depreciation, and amortisation (Ebitda) before employee stock ownership plans (ESOPs) fell to Rs 103 crore from Rs 234 crore year-on-year. The weak performance was attributed to temporary disruptions and regulator challenges faced by the company in the past 3 months. 

Additionally, Paytm saw a decline in its gross merchandise value (GMV) by approximately 8 per cent quarter-on-quarter.

Despite these challenges, Paytm's payments business revenue managed to grow 7 per cent year-on-year to Rs 1,568 crore in the fourth quarter. 

"We expect near-term financial impact to our revenue and profitability, due to disruptions faced in our business in Q4. This includes steady state impact due to pausing of PPBL wallet. We had also paused a few other payments and loan products to our customers during the last quarter, and I am happy to share that many such products have been restarted or in the process of starting soon,” said Vijay Shekhar Sharma, chairman and managing director of Paytm in a letter to shareholders. 

Stock performance

The stock performance has been under pressure, with a 13.70 per cent decline in the last three months. The stock has plunged 44.63 per cent year-to-date (YTD). Since its listing, the stock has fallen by 81.13 per cent.

The 52-week high of the stock is Rs 998.30 while its 52-week low is Rs 310 apiece. 

What do brokerages say?

Brokerage firms have differing perspectives on Paytm's future prospects. According to Morgan Stanley (MS), potential upsides include the allowance of a merchant discount rate under UPI, improved execution in financial services, and strategic tie-ups with large banks or NBFCs. Conversely, downsides may arise from heightened competition in payment services, increased pressure on payment charges, weak execution in financial services, and negative repercussions from changes in digital payment fees. Maintaining an 'equal-weight' stance, MS has set a target price of Rs 555.

On the other hand, Bernstein observed initial signs of recovery post-Q4 results. Key positives include a stabilisation in Gross Merchandise Value (GMV) and a resurgence in lending volumes, particularly in merchant loans.  

However, Bernstein also highlighted negatives, such as a major impact on the payments business and a shift towards distribution-only loans, which could weaken the company's revenue model.

According to reports, Macquarie maintained an 'Underperform' rating with a target price of Rs 275 per share, while Citi remained optimistic with an 'Outperform' rating and a target price of Rs 360 per share.

At 10:07 AM, shares of Paytm were trading 2.53 per cent lower at Rs 359.50 per share. By comparison, S&P BSE Sensex was trading 0.31 per cent higher at 74,449.42 levels.