Shares of Paytm jumped over 5% to touch a fresh 52-week high at INR 954.6 during the intraday trading on the BSE on Tuesday (October 10), after the company launched the industry’s first alternate ID-based guest checkout solution for merchants and an improving Street sentiment.

Several brokerages have noted in their recent research reports that financial services companies including Paytm are expected to post healthy growth numbers in Q2 FY24, largely on the back of steady sequential loan growth. 

With an overall positive stance on the payments and fintech players, Motilal Oswal said it estimates Paytm’s gross merchandise value (GMV) to grow 46% year-on-year (YoY) to INR 4.7 Lakh Cr in Q2 and the value of loans disbursed to jump 135% YoY and 16% quarter-on-quarter (QoQ) to INR 17,200 Cr.

In the prior quarter, Q1 FY24, Paytm reported a GMV of INR 4.05 Lakh Cr and disbursed loans worth INR 14,845 Cr.

In Q1, Paytm’s operating revenue stood at INR 2,342 Cr while its net loss declined to INR 358.4 Cr.

Motilal Oswal expects Paytm’s Q2 FY24 operating revenue to grow to INR 2,600 Cr and estimates its EBITDA before ESOP costs to come in at INR 175 Cr.

Paytm’s EBITDA before ESOP costs stood at INR 84 Cr in the previous quarter.

The brokerage currently has a price target (PT) of INR 1,000 on Paytm, which implies an upside of 10.5% to the stock’s last close on Monday. It has maintained its ‘buy’ rating on the stock.

However, we must note that in July this year, Motilal Oswal had raised its PT on Paytm to INR 1,050.

The brokerage said it expects Paytm’s operating profitability to increase, driven by improvement in contribution margin and operating leverage along with healthy growth in total revenue. 

Along with steady loan disbursals, Motilal Oswal sees the number of subscriptions for Paytm’s payment devices to witness strong traction in Q2.

Meanwhile, Bernstein has added Paytm to its India portfolio, along with NTPC, while removing Reliance and SBI.

“While it’s too early to declare winners in the digital lending space especially with the expected entry of Jio Financial Services, Paytm does appear to be on the right side of disruption with its dominant payments platform and a head start in digital credit products,” opined analysts at Bernstein.

The brokerage expects Paytm to continue its strong growth in the lending business (at about a 50% CAGR between FY23 and FY30). It also sees the fintech major turning profitable in FY25, helped by a rise in payments volume.

Bernstein retained its ‘outperform’ rating and PT of INR 1,100 on Paytm, which currently implies an upside of 21.5% to the stock’s last close.

Meanwhile, Yes Securities also has a PT of INR 1,025 on Paytm, implying an upside of over 13%.

“We pencil in an overall growth in revenue from operations of 14% QoQ. We forecast payment processing charges (PPC) as a proportion of payments revenue to be at 54.5%, a metric that was 54.9% in 1Q FY24,” said the brokerage. 

Yes Securities also sees Paytm’s total expenses (ex PPC) growth to be 7% QoQ, resulting in an EBITDA margin (ex other income and after ESOP cost) of -6.6%, an improvement of 591 basis points QoQ.

On the back of growing optimism, shares of Paytm have surged over 40% since March-end this year while they are up over 70% year to date. The fintech major’s shares plunged over 60% in 2022.

Shares of Paytm ended today’s session 4.9% higher at INR 949.5 on the BSE.