Goldman Sachs says Paytm adjusted-EBITDA could turn positive by March, raises target price

Goldman Sachs expects the fintech major to report a strong third quarter, which would put it on track to achieve EBITDA profitability (before accounting for employee stock ownership plan costs) by the fourth quarter. Ebitda is earnings before interest, taxes, depreciation and amortization.

Paytm, which is India’s largest fintech player, provides loans to its customers and merchant partners in partnership with non-banking finance companies. It earns commission based on the loans issued to Paytm postpaid users and merchants.

“Paytm’s MTU (monthly transacting users), loan disbursements and devices deployed continue to surprise us positively, and we further raised our estimates for these metrics,” Goldman analysts said in a report. Is.”

UPI reimbursement from the government as well as strong loan volumes and payment margins have led to an increase in share price.

Analysts said the improved margin will “further increase street confidence around the company’s ability to turn profitable in calendar year 2023.”

Goldman expects Paytm to achieve an adjusted EBITDA of $150 million by fiscal 2025, the highest among other listed Indian internet companies, ahead of Zomato and Nykaa.

One 97 Communications stock has fallen more than 65% on the National Stock Exchange since its initial public offering in November 2021 537.6 amid tough macro environment. The company, like other tech startups that have gone public in the past two years, has been under pressure from investors to achieve profitability. currently trading at 534.40 on the NSE, down 3.46% from its previous close.

In its updated analysis, Goldman said it sees higher benefits than risk of loss for Paytm, whose valuation is at a discount to its domestic and global peers given the multiple growth outlook.

Paytm said in an update earlier this month that it has seen a jump of 32% in average monthly transaction users to 85 million in the December quarter of FY23. For Q3, loan disbursement business sees over 4.5X growth, with fintechs disbursing over 10.5 million loans 9,958 crore, it said.

In Q2 FY23, Paytm narrows its losses 571 crore as against a net loss of Rs. 472.90 crore in the same period last year. Its revenue from operations for Q2 FY23 jumped 76% 1,914 crore on a year-on-year basis.