Domestic institutional investors have raised their holding in fintech major Paytm significantly in the fourth quarter (Q4) of the financial year 2024-2025 (FY25). As per the quarterly shareholding pattern filed by Paytm with the stock exchanges, domestic mutual funds increased their holding in the company to 13.11% in Q4 FY25 from 11.2% in Q3 FY25.

The growth was led largely by Nippon India Mutual Fund and Motilal Oswal Mutual Fund. Nippon India grew its shareholding by 0.4% to 2.8%, while Motilal Oswal held a 2.3% stake in Paytm in Q4 FY25, representing a 0.2% quarter-on-quarter increase.

Likewise, domestic alternate investment funds (AIFs) and insurance firms also raised their stakes in the fintech giant. During Q4 FY25, AIFs had a 0.45% stake in Paytm, up 25% QoQ from the previous quarter. Domestic insurance companies' participation also rose 200% QoQ to reach the same 0.45% in the current quarter.

In total, institutional holding, both domestic and foreign investors, increased by 1% QoQ to 69% as of March 2024. Foreign institutional holding declined, however, falling to 11.45 crore shares from 11.93 crore shares in Q3 FY25. This has been in tune with general market volatility, with foreign portfolio investors (FPIs) having been offloading shares for some reasons, ranging from US tariffs to Indian equity high valuations and concerns about corporate earnings growth.

Despite contradictory signals from brokerage houses, domestic institutional investors' enthusiasm continues. JM Financial recently reaffirmed a "BUY" rating on Paytm but reduced its price target to INR 1,010 from INR 1,250. Bernstein retained its "outperform" rating with a price target of INR 1,100, while Motilal Oswal lowered its target price to INR 870 from INR 950 but retained a "neutral" rating. Jefferies retained its 'hold' suggestion with a target price of INR 850.

Even as Paytm's stock has dropped more than 28% year to date (YTD), the positivity among domestic institutional investors is based mainly on the fintech firm announcing a string of new products focused on reaching profitability. Some of these initiatives involve a tie-up with RBL Bank to supply sound boxes and card machines to merchant partners, UPI-based trading facilities to retail investors, UPI statement downloads, and the inclusion of an AI engine driven by Perplexity in Paytm users.

On the financial front, Paytm had a net loss of INR 208.5 crore in Q3 FY25, down 6% from INR 221.7 crore in the comparable quarter last year. But operating revenue saw a steep 36% year-on-year (YoY) drop to INR 1,827 crore in the quarter ended.