Paytm rallies 5% as Q4 loss narrows; Goldman Sachs sets Rs 1,150 target

The company reported a net loss of Rs 168 crore for Q4FY23 as against a net loss of Rs 763 crore in the year ago quarter.

Shares of Paytm rallied 5.5 per cent to a high of Rs 726 on the BSE as the stock reacted positively to the company's Q4 performance. Paytm had sharply narrowed down its losses in Q4FY23 to Rs 168 crore as against a loss of Rs 763 crore in the corresponding quarter a year ago.

At 09:35 AM, the stock had pared some gains but was still up over 3 per cent at Rs 712. The counter had seen trades of around 45,000 shares as against the two-week average volume of around 1.96 lakh shares on the BSE. Meanwhile, the S&P BSE Sensex was up 0.7 per cent at 61,498.

The stock has outperformed the market significantly in the last six months, having rallied over 50 per cent from levels of Rs 480 at the end of November 2022. In comparison, the benchmark indices have declined around 3 per cent. 

Post Q4 earnings, Goldman Sachs has initiated a 'Buy' call on the stock, with a target price of Rs 1,150, indicating an upside of 66.80 per cent on the back of reporting second consecutive quarter of operational profitability.

We continue to expect Paytm to become the most profitable company within our India internet coverage starting FY25E, with EBITDA of $191 mn/ $322 mn in FY25/ FY26E, and net income profitability starting FY25. With profitability higher, and valutaions that are at the lower end v/s peers; we see risk-reward as skewed to the upside, the report stated.

We see resolution of outstanding regulatory issues (ban on Paytm Payment Bank and online merchant onboarding) as the next catalysts for the stock, the report added. 

On the Q4 earnings front, Paytm reported a solid 51 per cent growth in consolidated revenue at Rs 2,334 crore in the March 2023 quarter. In Q4FY22, revenue from operations stood at Rs 1,540 crore.

The company achieved operating profitability, well ahead of its September 2024 guidance, on account of the increased pace of monetisation, better cost management, and higher operating leverage. In Q4, its EBITDA before ESOP costs, excluding UPI incentives, rose to Rs 101 crore from (Rs 368) crore in Q4FY22. 

The company's payments services revenue grew by 41 per cent to Rs 1,467 crore in Q4FY23. Excluding prior quarters' UPI incentive, payments revenue grew 28 per cent YoY.

Paytm's loan distribution business, in partnership with marquee lenders also continued to scale. In Q4FY23, the total number of loans grew to 1.2 crore (up 82 per cent YoY) while the total value of loans amounted to Rs 12,554 crore, registering a growth of 253 per cent YoY.