Paytm hits over three-month high; stock surges 36% in two months

Despite its sharp run-up in the past two months, Paytm has underperformed the market by falling 34 per cent in the last six months as against a 12 per cent decline on the Sensex

Shares of One97 Communications, the parent of fintech firm Paytm, hit an over three-month high of Rs 739 as the stock gained 4 per cent on the BSE in Thursday’s trade amid heavy volumes. The stock traded at its highest level since March 11, 2022. In the past two months, the stock has rallied 36 per cent and has recovered 44 per cent from its record low of Rs 511, touched on May 15, 2022.

At 10:55 AM, Paytm traded at Rs 737, as compared to 0.43 per cent rise in the S&P BSE Sensex. Trading volume at the counter jumped nearly 1.5 times with a combined 3.4 million equity shares having changed hands on the NSE and BSE till the time of writing of this report.

That said, despite the sharp run-up in the past two months, Paytm has underperformed the market by falling 34 per cent in the last six months, as against a 12 per cent decline on the Sensex. The stock currently trades 66 per cent lower against its issue price of Rs 2,150 per share. Paytm had made its stock market debut on November 18, 2021. It hit a record high of Rs 1,961.05 on its listing day i.e. November 18, 2021 but has failed to touch its issue price since listing.

In April-June quarter of fiscal 2022-23 (Q1FY23) Paytm's total gross merchandise value (GMV) continued to remain strong as it clocked a robust growth (over 101 per cent YoY) at 2.96 trillion. Consumer engagement is at its highest on Paytm Super-App with average monthly transacting users (MTU) at 74.8 million for Q1FY23, up 49 per cent YoY.

The total number of loans disbursed grew 492 per cent YoY to 8.5 million in Q1FY23 (v/s 1.4 million in Q1FY22). Total value of loans disbursed grew 779 per cent YoY to Rs 5,554 crore in Q1FY23 (from Rs 630 crore in Q1FY22). The lending business is now seeing disbursements at an annualized run-rate of Rs 24,000 crore. Average ticket size is witnessing a continuous increase due to a scale-up in Personal loans.

Paytm is the leading "fintech horizontal" in India, having built more sources of monetization across payments, commerce and financial services than all of its competitors. This gives it the unique ability to drive monetization and profits across several segments at lower CAC vs peers.

"We expect Paytm to see strong revenue growth across all its business segments thanks to device monetization in payments, financial services cross-selling, ticketing recovery and rising ad monetization. We see revenues growing at a >40 per cent CAGR over F22-26 to ~$2.8 billion and CMs rising to 44 per cent by FY26E. We see it retaining the highest revenue and profit levels among local vertical and global horizontal peers," analysts at JP Morgan said in its recent report.

Technical View

Bias: Positive

Support: Rs 674, Rs 630

Resistance: Rs 770, Rs 807

Ever since its pull-back above the 20-DMA (Daily Moving Average) in mid-June 2022 the stock has consistently found support around the same, and trended higher.

The current chart structure exhibits a positive bias as long as the 20-DMA at Rs 674 is held on a closing basis, below which the next key support shall be the 50-DMA at Rs 630-odd level.

On the upside, the stock can test Rs 770-odd level as indicated by the weekly chart, above which the stock can test the trend line resistance around Rs 807.

(With inputs from Rex Cano)