Paytm shares locked-in 10% upper circuit amid heavy volumes

Bloomberg reported that Paytm’s share of the unified payments interface (UPI) market in India fell for a fourth straight month as the fintech pioneer struggles to recover from a regulatory setback.

Paytm accounted for 8.1% of total UPI transactions in May, down from 13% in January, according to data released by the National Payments Corporation of India.

Shares of the company jumped 20% in the last one month following the reports that there could be a deal between Adani and Vijay Shekhar Sharma. Paytm denied any talks in this regard.

The company's shares, however, fell over 40% in the last 6 months with investors expecting the company to turn net profit-positive only by FY29.

Analysts say the biggest challenge for Paytm is the RBI ban. "So I think only if the management change happens and they are able to procure that approval from RBI to get back into the payments bank business that would be a big trigger for the stock. We have a neutral rating right now and we are in a wait-and-watch mode for Paytm," said Siddhartha Khemka of Motilal Oswal.

Following the RBI's restrictions on its Payment Bank, the company expects a near-term financial impact on the revenue and profitability.

"While we experienced financial impact in Q4 due to the above disruptions, the full financial impact will be seen in Q1 FY25. We expect Q1 revenue of Rs 1,500-1,600 crore and EBITDA before ESOP of (Rs 500)–(Rs 600) crore. We are confident of seeing meaningful improvement starting from Q2FY25, based on restarting certain paused products and achieving steady growth in operating metrics," the company had said earlier.

While indirectly warning of job cuts, Paytm said it is optimizing cost structure, leveraging AI capabilities, and focusing on core business to achieve significant cost efficiencies. This includes creating a leaner organization structure and pruning non-core businesses, it had said.

"We expect Paytm to witness significant business disruption in FY25E, and recuperation to begin gradually thereafter, subject to no further regulatory hurdles. Thus, factoring in the business slowdown, lower take rates in the payment and lending businesses, and higher operational burn, we expect Paytm to turn net profit-positive only by FY29," Emkay analyst Anand Dama said.

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