Bernstein on Monday said the December quarter results by One 97 Communications Ltd (Paytm) had plenty to cheer about. It called the quarterly results solid in a rather gloomy operating environment for the lenders, with loan disbursals rising 6 per cent sequentially, payment volumes surging from a festive boost and cost control continuing, as Paytm inches closer to profitability. Bernstein noted that gross merchandise value (GMV) has recovered to the quarterly peak seen in December 2023, despite loss of certain products due to regulatory actions in January 2024. MTUs trajectory too finally saw an inflection, with MTUs in December inching up to 7.2 crore after stagnating at 6.8-6.9 crore for the last few months.
Following the quarterly results, Paytm shares were trading 0.66 per cent higher at Rs 905.80. Bernstein suggested a target price of Rs 1,100 on the stock.
Loan disbursals continued to be driven by merchant loans. The total loan disbursals grew 6 per cent QoQ, with merchant loan disbursals recording a strong 16 per cent sequential growth during the quarter, Bernstein said.
"Personal loan disbursals declined by 12 per cent QoQ, a result of the industry wide slowdown in unsecured loan growth. Financial services revenue saw a strong 34 per cent growth sequentially on account of a higher share of merchant," Bernstein said.
The foreign brokerage said Q3 was another quarter of tight cost control that saw indirect expenses (ex-ESOP) declining 7 per cent QoQ, primarily on account of reduction in non-sales employee costs, even as sales employee cost remained flat despite average number of sales employees rising by 6 per cent QoQ.
"Paytm hence reached in the touching distance of EBITDA before ESOP level profitability," Bernstein said.
It said the festive quarter saw Paytm's quarterly GMV cross the Rs 5 lakh mark with GMV almost touching the peak quarterly GMY witnessed in Dec-23. "Net payments margin was stable at 10 bps during the quarter with the payment processing margin above the guided 3 bps (ex-UP| incentive) range. And while Average MTUs declined during the quarter, the MTUs staged a recovery on monthly basis with Dec-24 MTUs touching 72 Mn (6 per cent above the Aug-Sep'24 bottom)," it said.