• The buyback plan is expected to ease the growing concerns in Paytm. The company's management expects the buyback to benefit its shareholders. On the other hand, the stock also gained momentum after continuing record healthy growth in payments and loan disbursements.
Bulls flooded India's digital payments giant Paytm stock in early session on Tuesday as investors anxiously await details on the buyback proposal. The board of directors of the company is scheduled to meet today to consider the proposal. The buyback plan is expected to ease the growing concerns at Paytm. The company's management expects the buyback to benefit its shareholders. On the other hand, the stock also gained momentum after continuing to record healthy growth in payments and loan disbursements in the first two months of Q3FY23.
On both BSE and NSE, Paytm stock climbed nearly 3% each.
The stock is currently trading at ₹539.45, up 2.15% on BSE. It was close to a day's high of ₹542.65. Presently the market cap of the company is more than ₹35,030 Crore.
On the previous day, Paytm stock closed at ₹528.10 per share on BSE. Since its listing in November last year, Paytm stock has seen more bears than bulls and the stock is currently trading at about 75% discount compared to its IPO issue price of ₹2,150.
On BSE, the stock's 52-week high and low is ₹1,584 per share and ₹439.60 per share, respectively. The stock has declined by at least 66% in a year. Year-to-date, through December 12, the stock has fallen more than 60.5%.
However, the current month has been fruitful so far. So far in December, Paytm's stock has gained about 13 per cent.
As per a regulatory filing, last week, Paytm said, "A meeting of the Board of Directors of the Company is scheduled to be held on Tuesday, December 13, 2022, to consider a proposal for buyback of fully paid-up equity shares of the Company."
It was also learned that the management is of the view that given the prevailing liquidity/financial position of the company, buyback may be beneficial to its shareholders.
The brokerage is bullish on Paytm's buyback. According to Daulat Capital, the Paytm buyback will be a clear cloud over the growing concern. It added that Paytm's buyback at current valuations makes a lot of sense given the declining need for organic capital allocation and very attractive valuations for the Paytm business.
In its note, Daulat Capital said it believes the buyback announcement will address concerns of many investors regarding the business's profitability and cash generation roadmap, any further supply pressures likely from large investors in the near future, and management Will promote confidence in optimum capital of Rs. Potential for further earnings growth through allocation exercise and buyback route in future.
On the other hand, Paytm on Monday reported its operational performance for the first two months of the third quarter of FY23.
During the first two months of Q3 that ended Nov 2022, the company's value of loans disbursed grew 374% YoY to ₹6,292 crore, while the number of loans disbursed grew 150% YoY to ₹6.8 million cumulatively Loan done. At the same time, the company continued to strengthen its leadership in offline payments, with more than 5.5 million merchants now paying subscriptions to payment instruments.
Meanwhile, the company's total merchant GMV processed through its platform stood at ₹2.28 lakh crore. In the two months of Q3 FY23, which ends November 2022, user engagement across the company's super apps has been on a steady rise with an average MTU of 84 million.
Morgan Stanley in its report noted that the total number of Paytm loans disbursed in Nov-22 stood at 3.4 million (+139% YoY), broadly stable versus Oct-22 (+161% YoY) and Sep-22. 22 had 3.2 million. For QE Sep-22, the number stood at 9.2 million (+224% YoY) versus 8.5 million (+492% YoY) in the previous quarter. For FY22, the number of loans disbursed stood at 2.6 million versus 15.2 million (+478% YoY) in FY21. Total devices deployed increased to 5.5 million compared to 5.1 million last month. On a trailing 12-month basis, Paytm added 3.9 million devices, representing a 2.4X increase from a year ago. During QE Sep-22, Paytm added 1 million devices as compared to 0.9 million devices in QE Jun-22.
Thus, Morgan Stanley maintains 'Equal-Weight' rating on Paytm on the strong November 2022 numbers, and sets a price target of ₹695 on Paytm.
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