Brokerage firm Citi remains bullish on Paytm even as the stock continues to fall on stock exchanges.
Citi has ‘Buy’ rating on Paytm with a target price of Rs 1,055.
Paytm today ended trading at Rs 441.05, down 2.49 per cent, on BSE.
Paytm operator One 97 Communications has pulled off its worst first-year decline among large IPOs (initial public offerings) in the last decade, according to a Bloomberg report.
The company, whose founder likened the challenges faced by Tesla Inc soon after listing, wiped off 75 per cent of its market value a year after offering its stock for $2.4 billion, which at the time was on record in India. The drop globally was the sharpest first-year decline among IPOs, which have raised at least the same amount since Spain’s Bancia SA plunged 82 per cent in 2012…” Bloomberg reported. Having said.
The Citi report comes a day after global investment group Prosus commented on its India payments business. Prosus said: “In India, our largest payments market, TPV (total payment value) grew 59 per cent to $28 billion, and revenue grew 48 per cent to $183 million, across e-commerce, financial services and bill payments. After a surge in digitization, and a return to travel post-pandemic.”
PayU is the fintech and payments arm of Prosus.
Comparing it with PayU, Citi said Paytm has gained market share in digital payments compared to PayU.
Citi said the increase appears to be comparable at a merchant discount rate (MDR) generated on the basis of total paid value (TPV) at 59 per cent for PayU versus 52 per cent for PayU (Paytm) for the January-June period .
In the buy-now-pay-later segment (BNPL), Paytm is witnessing a faster growth in its active customer base as compared to PayU’s LazyPay.
Citi said Lejipay’s reported loss-rate has increased by 30 basis points to 3.1 per cent over calendar year 2021, which is “something to watch for the broader BNPL space in India”.
Paytm has reported stable asset performance across its lending partners’ portfolio with a loss-rate of 1.1-1.3 per cent for BNPL products.
“We acknowledge the greater risk from further sales by existing pre-IPO shareholders and that fintech is a competitive space, but at these valuations, those risks are overstated,” Citi said.
“This stock has a high risk rating based on our quantitative models, but its healthy net cash position and the potential for further decline in cash burn do not support a high risk rating,” said analysts at Citi.
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