Thursday, Aug 11, 2022

Paytm's First ‘Buy’ Report After IPO Flop Predicts It Will Turn Profitable By 2026

Despite facing severe losses, Paytm will turn profitable by March 2026 says the analysis of a brokerage firm. The analysis report also mentions that the business model of Paytm is sustainable since it is the most impactful and real-economy internet business.

Paytm, after it has moved vividly since its listing after India’s largest initial public offering and faced a severe failure too, received the first buy rating from a brokerage, Dolat Capital Market Pvt. The report predicts that the company will turn profitable by March 2026.


The analysis of Dolat mentions that Paytm’s “super app” has emerged from a pure “want” category to reach the “need” status. Paytm has become “one of the strongest digital brands to garner a significant share of opportunities that will evolve in the Indian internet ecosystem,” says the report.


The brokerage has set a target price of Rs 2,500 ($33.4), which is 16 per cent higher than the company’s issue price. On the fifth day of its decline, Paytm dropped as much as 2.7 per cent to Rs 1,592 on Thursday, after witnessing a fall of 37 per cent in the first two sessions of trading. JM Financial has a sell rating on the stock, while Macquarie has rated it as underperform.


One 97 Communications Ltd., Paytm’s parent company, has the backing of top global investors, including Masayoshi Son’s SoftBank Group Corp., Warren Buffett’s Berkshire Hathaway Inc. and Jack Ma’s Ant Group Co.  It raised $2.5 billion in its IPO. Paytm reported its first financial results as a public company over the weekend.


The losses incurred to Paytm widened to 4.74 billion rupees in the July-September quarter from a year earlier amid rising expenses. Its revenue rose more than 60 per cent, due to its strong growth in its financial, commerce and cloud services.


Despite facing losses after the initial gain in the IPOs, the report mentions, “however we see it as sustainable since it is the most impactful and real-economy internet business.”


The company reported a net loss of Rs 473 crore for the September-ended quarter as compared to Rs 436 crore loss in the same period last year. This is 8 per cent wider than the previous quarter. The company attributes the loss to a 40 per cent increase in expenses during the second quarter. This may include IPO expenses. According to the company’s report, it has spent over Rs 7 crore on its IPO.