Paytm shares increase threefold after non-core business divestment

The company is seeing signs of recovery, with monthly transacting users (MTUs) at 71 million at the end of the September quarter of this financial year

Shares of One97 Communications, the company that operates the Paytm brand, has regained lost ground, tripling from its previous low of Rs 317 per share on May 8, 2024.

 

On Monday, the firm's share price hit a 52-week high of Rs 1,007.

 

The Noida-based company’s stock price closed at Rs 969.70, which was 0.67 per cent lower than the previous day.

 

On a year-to-date (YTD) basis, the share price of the fintech major is up 52.9 per cent from Rs 646.3 per share.

 

The rally comes on the back of the company’s Singapore unit selling a stake in Japanese payments company PayPay Corporation for Rs 2,364 crore last week. This has strengthened the parent firm’s cash reserves.

 

 

Paytm currently has a cash balance of over Rs 10,000 crore. The Rs 2,364-crore sale would expand it by over 20 per cent.

 

The company sold its entertainment ticketing business to Zomato for Rs 2,048 crore in August.

 

Earlier this year, the Reserve Bank of India (RBI) imposed crippling restrictions on Paytm’s associate entity, Paytm Payments Bank, for non-compliance.

 

The company is seeing signs of recovery, with monthly transacting users (MTUs) at 71 million at the end of the September quarter of FY25. 

 

“With the National Payments Corporation of India (NPCI) approving new Unified Payments Interface (UPI) client onboarding under the third party application providers (TPAP) licence, the company expects to see a revival in MTUs from Q3. On the merchant side, Paytm plans to redeploy inactive devices after refurbishment (11.2 million total devices),” said Nirmal Bang Institutional Equities in a note after hosting Anuj Mittal, senior vice-president, investor relations, One97 Communications, at its investor conference.

 

It added that the company is making efforts to reactivate about 135 million inactive customers.

 

In March, the company received approval from the NPCI to operate as a TPAP.

 

The apex payments’ body gave its nod in October for the company to onboard new users on the UPI service. This is nearly nine months after it placed an embargo on Paytm for adding new customers.

 

Within two weeks of the regulatory action, the share price of One97 Communications plunged over 57 per cent to Rs 325.05 on February 15.

 

“Paytm has finally received NPCI approval for adding new UPI users, which paves the way for re-accelerating its dwindling user base and further signals an easing of the regulatory stance. We believe Paytm’s cost optimisation measures and gradual business turnaround will put it on an early path to profitability,” Emkay said in a note following the firm’s Q2FY25 results.

 

In Q2FY25, the company posted a consolidated profit of Rs 928.3 crore compared to a loss of Rs 290.5 crore a year ago. This was driven by the sale of its movie ticketing and events business to Zomato.

 

On a year-on-year (Y-o-Y) basis, revenue from operations declined 34.1 per cent from Rs 2,518.6 crore in Q2FY24 to Rs 1,659.5 crore in Q2FY25. Sequentially, revenue grew 10.5 per cent from Rs 1,501.6 crore in Q1FY25.