Paytm shares surge 54% in 3 months: What's fueling rally?
Shares of One97 Communications, the parent firm of Paytm, have witnessed a significant recovery recently. Over the past three months, the stock has risen by 54% to ₹554 per share. This surge represents a rebound of 79% from its all-time low of ₹310 in May, during a four-month decline. The downturn was triggered by the Reserve Bank of India's decision to wind down Paytm Payments Bank due to compliance issues.
Strategic business move with Zomato
In a strategic move, Paytm has decided to sell its entertainment and ticketing business to Zomato. Despite this sale, Paytm will still offer ticketing and entertainment options on its app for the next 12 months. However, users will be redirected and urged to switch to Zomato's forthcoming app for the 'going-out' segment. This move aims at replacing revenue from its entertainment ticketing business by focusing on expanding core areas such as payments and financial service distribution.
Financial performance and future projections
Paytm reported a net loss of ₹840 crore in the June quarter, a significant increase from the previous year's loss of ₹358 crore. This was due to weakness in payments business following RBI's directive to shut down its banking unit in February. However, the firm expects profitability and revenue to improve starting from the second quarter, driven by better cost management and improvements in operating metrics like gross merchandise value and merchant device additions.
Bernstein and Citi Research's outlook on Paytm
Global brokerage firm Bernstein has reiterated its 'buy' rating on the share with a target price of ₹600 per stock. They project that the business, in its current structure, is tipped to achieve profitability by 2026-27. Meanwhile, Citi Research has raised its target price for the stock to ₹440 per share, from an earlier target of ₹410 per stock, citing the sale of Paytm's entertainment ticketing business to Zomato as a positive development for the company.
