Top brokerages split over Paytm — Macquarie sees Paytm at ₹450, ICICI Securities at ₹1,285

• ICICI Bank and Goldman Sachs estimate Paytm stock to trade anywhere between ₹1,000-1,300.
• Paytm stock dropped below the ₹1,000 threshold in January 2022 and has not made a comeback since.
• One97 Communications’ shares hit an all time low two weeks ago, when the share price hit ₹517 apiece on May 12.

It has been almost six months since Paytm made its market debut, yet top brokerages are split over its valuation. Once again, Macquarie, Goldman Sachs and ICICI Securities have set vastly different target prices for the shares of this digital payments giant.

Global investment bank Macquarie has set Paytm’s target price at ₹450, which is the lowest among the current lot. Meanwhile, ICICI Bank and Goldman Sachs estimate Paytm stock to trade anywhere between ₹1,000-1,300.
Paytm stock dropped below the ₹1,000 threshold in January 2022 and has not made a comeback since. Notably, Macquarie has been constantly revising Paytm’s target price —starting from ₹1,200 in November 2021 to ₹700 in February 2022 — and the shares have largely followed the trends.

The company — listed under the name One97 Communications — was trading at ₹607.6 at 12:19 pm on Monday. This is over 112% lower than the issue price of Paytm’s share i.e. ₹2,150.

Issue price refers to the price at which the shares are available when a company first becomes available for purchase by the public during its initial public offering (IPO). Paytm had sold its shares at a valuation of $19.9 billion during its public issue, but the company’s currently valued at ₹39,440 crore (marginally higher than $5 billion) - around a quarter of its original value.

One97 Communications’ shares hit an all time low two weeks ago, when it hit ₹517 on May 12.

The trigger for the recent reports is Paytm’s financial statement. Its operational revenues increased from ₹2,802 crore in FY2021 to ₹4,974 crore in FY2022. Its net loss also swelled by nearly ₹700 crore to ₹2,396 crore.

Brokerages split on profitability forecasts as well

Macquarie believes that profitability is still an uphill battle for Paytm, which may take another 12 quarters — or about 3 years — to break even. While ICICI Securities expects Paytm to be EBITDA positive by FY2025, Goldman Sachs expects Paytm’s EBITDA breakeven to land by September next year. EBITDA stands for earnings before interest, taxes, depreciation, and amortization.

Goldman Sachs however is buoyed by the company’s improving monetization of the payments vertical and a robust growth in financial services and cloud businesses.

"All this while cash burn has been improving, and the company reiterated its guidance of adjusted Ebitda breakeven by September 2023, which we see as a key catalyst for the stock," Goldman Sachs added.

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