Paytm may achieve positive adjusted-Ebitda by March, predicts Goldman Sachs, raising target price

Paytm may achieve positive adjusted-Ebitda by March, predicts Goldman Sachs, raising target price
According to Goldman Sachs, Paytm, a prominent player in the fintech industry, may achieve adjusted Ebitda profitability by March 2023, six months earlier than the company had anticipated. The research group increased its target price for One 97 Communications, the company that owns Paytm, from 1,100 to 1,120. According to Goldman Sachs, the fintech industry leader will announce good third-quarter results, putting it on track to attain Ebitda profitability by the fourth quarter (before taking employee stock ownership plan expenditures into account). Earnings before interest, taxes, depreciation, and amortisation are referred to as Ebitda.
Paytm, which is India’s biggest fintech player, provides loans to its customers and merchant partners in partnerships with non-banking finance companies. It earns a commission based on the loans it issues to Paytm postpaid users and merchants. “Paytm’s MTU (monthly transacting users), loan disbursals and devices deployed continue to surprise us positively, and we have further raised our estimates for these metrics," Goldman’s analysts said in a report.
The upgrade on the stock price comes on the back of stronger lending volumes and payment margins, coupled with UPI reimbursement from the government. The improving margins would “further increase the street’s confidence around the company’s ability to be profitable in the calendar year 2023," the analysts said. Goldman expects Paytm to achieve an adjusted EBITDA of $150 million by financial year 2025, one of the highest compared to other listed Indian internet companies, ahead of Zomato and Nykaa.
One 97 Communications stock, since its initial public offering in November 2021, has plunged by more than 65% on the National Stock Exchange to 537.6 amid tough macro environment. The company, like other tech startups that went public in the last two years, has been under pressure from investors to achieve profitability. Currently, it is trading at 534.40 on the NSE, down 3.46% from previous closing.
In its updated analysis, Goldman said it sees more gains than risk of a loss for Paytm, whose valuation multiples are at a discount to its domestic and global peers, considering the outlook for growth. Paytm, in an update earlier this month, said it has witnessed a 32% jump in average monthly transacting users to 85 million in December quarter of FY2023. For the third quarter, the loan distribution business saw a growth of over 4.5X with the fintech disbursing loans over 10.5 million worth 9,958 crore, it said.
Paytm's losses increased to 571 crores in the second quarter of FY23 from a net loss of 472.90 crores during the comparable period in FY22. On a yearly basis, its operating revenue during the second quarter of FY23 increased by 76% to 1,914 crore.