paytm shares Archives

Here are some of the major updates that could move the markets tomorrow:

Tata-owned BigBasket eyes IPO by 2025 after $200 million fundraising: Report

According to a BQ Prime report, Tata Group’s online grocer BigBasket is expected to launch an initial public offering (IPO) within three years after the recent fundraising valued the online grocer at $3.2 billion. The company had raised $200 million (~₹1,650 crore) to boost its quick commerce arm and expand its nationwide footprint. At present, BigBasket operates in 55 cities. The company wants to expand to 75 cities by March 2023.

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Auto components industry grew 34.8% to ₹2.65 lakh crore in H1 FY23

India’s auto components industry witnessed a 34.8% YoY growth to ₹2.65 lakh crore in the first half (H1) of the current financial year (FY2022-23), said the Automotive Component Manufacturers Association of India. During the period, exports of components grew by 8.6% to ₹79.03 lakh crore, while imports rose 17.2% to ₹79.8 lakh crore. There was strong demand in the domestic market, particularly from the passenger vehicles segment.

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Mankind Pharma enters pet care segment with ‘PetStar’ brand

Mankind Pharma has diversified into the pet care segment with the launch of its ‘PetStar’ brand. The brand aims to build and support the pet care ecosystem by offering pet food, medicine, supplements, and grooming products. The pharma company aims to make PetStar a loved, palatable, nutritious, and healthy food brand for pets such as dogs and cats.

Read more here.

M&M to continue strong momentum owing to robust demand for newly-launched SUVs

Mahindra & Mahindra’s revenue market share in the SUV category stood at 19.9% in Sept 2022, up from 12.9% in Sept 2021. The company had pending orders for 2.6 lakh SUVs at the close of last quarter. M&M’s new launches (Thar, XUV700, and Scorpio) have been received well, and the automaker is confident of maintaining this momentum with a strong order book and in-demand blockbuster products.

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Credit growth far away from being considered ‘exuberant’: RBI Governor

The present credit (or loan) growth in India is far away from being considered ‘exuberant’ and there is no ‘big gap’ between the credit growth and deposit accretion when looking at the absolute numbers, said RBI Governor Shaktikanta Das at the BFSI Summit organised by Business Standard. Credit growth is going up after two years of being depressed, while the deposit growth number has come off a relatively higher growth during the pandemic years.

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IndiGrid, G R Infraprojects partner to bid for power transmission projects worth ₹5,000 crore

India Grid Trust (IndiGrid) and G R Infraprojects Ltd (GRIL) have partnered to bid for identified power transmission projects worth ₹5,000 crore. The two firms have entered into a framework agreement to acquire a 100% stake in Rajgarh Transmission Ltd, which GRIL won in March 2022. The power ministry has recently unveiled a plan for investment of ₹2.5 lakh crore in building transmission infrastructure for meeting the vision of 500 GW of renewable energy capacity by 2030.

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IL&FS transfers two more road assets worth ₹976 crore to Roadstar InvIT

IL&FS has transferred two more road projects— Hazaribagh Ranchi Expressway and Thiruvananthapuram Road Development Company— to Roadstar Infra Investment Trust (InvIT) at an enterprise value of ₹979 crore. With this, secured lenders of both the assets, including Punjab National Bank, Union Bank, Indian Overseas Bank, and others (with a combined debt of over ₹630 crore) will get 100% recovery through restructuring of their debt under the InvIT.

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Paytm CEO says there will be no more cash burn

Paytm CEO Vijay Shekhar Sharma said that going ahead, there will be no more cash burn in the business. He also added that the digital payments firm was far ahead in re-setting its ambition on controlling spending. Paytm had net cash, cash equivalents, and an investable balance of ₹9,182 crore at the end of September, according to its latest quarterly earnings report. CLSA also upgraded Paytm in November, saying that cash burn could end in another 4-6 quarters.

Read more here.

Bharti Airtel launches 5G services in Ahmedabad, Gandhinagar, Imphal

Bharti Airtel Ltd announced the launch of high-speed 5G services in Ahmedabad and Gandhinagar (Gujarat). The company also announced the rollout of 5G services in Imphal (Manipur). Customers with 5 G-enabled devices can enjoy the high-speed network at no extra cost until the rollout is more widespread. Airtel 5G will allow superfast access to high-definition video streaming, gaming, and multiple chatting.

Read more here.

What Led to the Recent Rally in Paytm’s Shares?

Market analysts have primarily attributed the stock’s rally to a triangular pattern breakout above Rs 640-650, supported by large volumes. Let’s look at the chart to understand this:

Source: TradingView

Reports of a share buyback by Paytm’s promoters have also boosted the morale/sentiments of investors. CEO Vijay Shekhar Sharma had purchased 1.72 lakh shares of One97 Communications worth Rs 11 crore. A share buyback is a process wherein a company or its promoters buy back its own shares from shareholders at fair market value.

Fundamentals Remain Weak

One97 Communications reported a 41% year-on-year (YoY) increase in its consolidated net loss to Rs 2,392.9 crore for the financial year 2021-22 (FY22). However, the startup’s revenue from operations grew 77% YoY to Rs 4,974.2 crore in FY22. They saw a healthy increase in consumer and merchant payments & loan disbursements through its partners on Paytm. Average monthly transacting users (MTU) rose 35% YoY to 6.08 crore during the same period.

Time and again, high expenses have been blocking the company’s road to profitability. Paytm made huge investments in marketing expenses to grow its monthly transacting users (MTU) in FY22. Its employee costs rose due to investments to scale up its device deployment from 8 lakh per quarter to 10 lakh per quarter. [Paytm offers smart point-of-sale (POS) hardware devices for merchants.]

(Values in Rs crore)

In the last quarter of FY22 (Q4), Paytm’s net loss rose 72% YoY to Rs 762.5 crore, while revenue from operations grew 89% YoY to Rs 1,541 crore. Earnings before interest, tax, depreciation, and amortisation (EBITDA) remained negative during the quarter. However, it narrowed from Rs 420 crore in Q4 FY21 to Rs 368 crore in Q4 FY22. The startup declared it is on track to break even at the EBITDA level by the July-Sept quarter of FY23.

The Way Ahead

One97 Communications’ shares have been on a free fall since it got listed in November 2021. It crashed over 70% from the IPO price of Rs 2,150. The company was highly overvalued, especially when the path to profitability was unclear. Many find Paytm’s business model problematic as it generates very low revenue for every dollar spent on marketing. In a major blow, the Reserve Bank of India (RBI) directed Paytm Payments Bank (PPB) to stop onboarding new customers due to supervisory concerns in March 2022.

Paytm often dabbles in numerous business lines, and it has become difficult for them to work out a solid business model. A high level of competition in the fintech space is also weighing down on their operations. As a result, many global and domestic analysts had advised against buying the company’s shares and slashed their target prices on the stock.

However, CEO Vijay Shekhar Sharma expects his company to achieve operational profitability by Q2 FY23. They are focusing on increasing consumer engagement and merchant base to achieve higher revenue from payment services. Paytm is also scaling up its loan disbursement business, where it offers Paytm Postpaid (Buy Now, Pay Later), personal loans, and merchant loans. Moreover, the proposal of linking credit cards to UPI is expected to benefit the full-stack payments and financial solutions provider.

Let us wait patiently and see how One97 Communications performs in the upcoming quarters. Have you invested in the company? Let us know in the comments section of the marketfeed app.