Analysts at JP Morgan said, “We view Paytm as a one-of-a-kind ‘fintech horizontal’ given its ability to drive monetisation across categories and defray customer acquisition costs (CAC) across a range of products.”

Paytm, the digital payments startup, has declined 38% since its listing. The stock has underperformed Nifty sharply and is trading at a discount to private and global peers. But JP Morgan has assigned an ‘overweight’ rating to the stock.

Analysts at JP Morgan said, “We view Paytm as a one-of-a-kind ‘fintech horizontal’ given its ability to drive monetisation across categories and defray customer acquisition costs (CAC) across a range of products.”

Breakeven point – as per JP Morgan

The global brokerage firm believes that Paytm can deliver ~60% revenue growth and ~10x expansion in contribution profits over FY 2021-24. This could help the firm achieve cash breakeven and positive free cash from FY 2025 onwards without losing excess cash on the balance sheet.

JP Morgan expects Paytm to sharply beat consensus FY 2023/24 GMV/revenue growth expectations. This could be the primary share price catalyst.

The global rating firm believes that the key risk to Paytm is the credit loss in the lending business, although the company does not take credit risks on its books.

Says JP Morgan, “Given the low ticket size nature of lending and an unseasoned book, a through-cycle credit loss in the portfolio is not yet established. We are less concerned about competitors as most are focused on the non-monetizable UPI business or are vertical-focused fintechs that have a fraction of the revenue of Paytm.”

Morgan Stanley’s view

Morgan Stanley shares a similar sentiment about Paytm. It has assigned an ‘overweight’ rating to the digital payments startup Paytm and sees an attractive risk-to-reward, valuing the firm at $ 17 bn. Analysts at the global firm opine that Paytm’s profitability should improve sharply as financial services scale up. They expect the company to break even at the operating profit level in FY 2025. 

Paytm – one of the worst IPO listings of 2021

One 97 Communications Ltd, Paytm’s parent company, had raised $ 2.5 bn in its IPO in 2021. The stock closed 27% lower than its issue price on the listing date, which was one of the worst market debuts by a major technology firm since the dot-com bubble era of the late 1990s.

Aradhana Gotur

6 Comments

  1. I m not sure on paytm , because phone pe and google pay are strong competetor..

    • Yes, but G-Pay does not comply with regulations of RBI.

      Also I have learnt from many customers that unauthorized transactions has been done. Its even on consumer complaints portals.

      Hence, Phone Pe is its competitor

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