From BofA to ICICI Securities, analysts expect a strong Q3 for Paytm with reduction in adj EBITDA losses

Paytm, India’s leading digital payments and financial services company and the pioneer of QR and mobile payments, could surprise with better-than-expected adj EBITDA losses in the third quarter of the fiscal, says BofA Securities in its research note. Analysts at the research firm estimated that Paytm will post 1% q-o-q revenue growth versus 14% in July-September 2022. Research firm noted that this would be on the back of focus on rationalization where the company is looking to cut back on the unprofitable GMV.

BofA Securities added that while this has a negative impact on the revenue growth, from a profitability perspective, it is positive. "Indeed on the back of this, we expect Paytm's adjusted EBITDA losses to reduce to Rs 1bn (from Rs 1.6 bn in the second quarter of the fiscal). This would translate to adj. EBITDA margin of (-)6% as compared to (-)9% in July-Sept quarter, bringing Paytm a step closer to profitability.

Paytm to remain aggressive to target new users, new merchants

It also expects Paytm's momentum in the lending business as well as its merchant traction to remain strong in Q3. "We don't expect any government reimbursement on UPI in this quarter," it said. Going ahead, despite focus on cost control, BofA sees Paytm to continue to remain aggressive to target new users and new merchants as it looks to fortify its presence in the market. BofA Securities maintains 'neutral' rating on Paytm stock on balanced risk-reward.

ICICI Securities sees improvement in adjusted EBITDA of Paytm Q3FY23

Analysts at ICICI Securities in 4th January 2023 estimated a 11% quarter-on-quarter operating revenue growth on the back of increasing GMV and lending business along with some increase in commerce and business. "With management’s focus on improving its operating profitability, we expect its direct expenses to decline sequentially and employee expenses (excl. ESOP) to be more or less flat which should improve its adjusted EBITDA (EBITDA before ESOPs)," it added. The research and brokerage firm has given a 'buy' rating to the Paytm stock.

Paytm’s strong performance in Dec’23 quarter further strengthens analysts’ expectations

Paytm disbursed loans worth Rs 3,665 crore ($443 million) in the given period, growing 330% on-year. The fintech company also added one million payment devices during the quarter and the number of merchants paying subscription for payment devices touched 5.8 million as of December 2022. The company's consumer engagement was at its highest on the Paytm Super App with average monthly transacting users at 85 million for the quarter ended December 2022, up 32% percent year-on-year.

Paytm also posted consistent growth in total merchant payments volume as the total merchant GMV (gross merchandise volume) aggregated to Rs 3.46 lakh crore ($42 billion) for the quarter ended December 2022, marking a year-on-year growth of 38%.