There has been a lot of buzz around the pre-initial public offering (IPO) lock-in expiry of multiple companies in October. While the lock-in expiry could lead to a drop in stock price, investors see Paytm as a long-term bet and the share price disruption due to the lock-in expiry will only bring a small blip in its journey.
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This is evident from the fact that Paytm’s business model and monetization strategy has helped the company consistently deliver strong financial results for multiple quarters.
After pioneering India’s mobile and QR payments, Paytm has been focused on delivering stronger execution to empower its growing user and merchant base with seamless services and products. From payments to loan distribution and devices, Paytm key businesses are consistently expanding and creating long-term value for its customers and investors.
In the second quarter of FY23, Paytm posted a 76% y-o-y revenue growth of Rs 1,914 crore, while its contribution profit surged 224% y-o-y to Rs 843 crore. The company saw a 61% y-o-y improvement in EBITDA before ESOPs to Rs 166 crore and remains focused on trimming indirect costs despite continued investments in technology, sales and marketing. With this, the company’s management remains confident that the company is on track to achieving operating profitability by the quarter ending September 2023.
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Top brokerage firms such as Goldman Sachs, Morgan Stanley, JP Morgan, ICICI Securities and Citi remain optimistic about Paytm’s future potential, given its leadership position in payments and financial services. Goldman Sachs has also added Paytm to its conviction list and remains bullish about the company’s potential to create long-term value in India’s massive digital payments and financial services market.
Goldman Sachs in its recent report had said, “While we recognize that lock-in expiry on 15 Nov may represent an overhang on the stock, we expect Paytm to deliver 40-50% revenue growth for the next few quarters and continue its transition from an erstwhile payments-only business to one with a strong financial services portfolio, aiding profitability.”
In fact, some analysts even believe that the Paytm stock could become a multibagger in future, given its focus on creating the most diverse ecosystem of payments and financial services Dipan Mehta, Director, Elixir Equities, had said a couple of months ago that the next set of multibagger stocks will come from digital businesses, adding that the Paytm stock is on his ‘watchlist’.
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In a recent letter to shareholders, Paytm Founder, MD and CEO Vijay Shekhar Sharma reiterated that the company is on the right path to profitability and free cash flow generation. “Our journey to build a scalable and profitable financial services business has just started,” he said.
