Paytm concerns are ‘too pessimistic’, says Citi

Vijay Shekhar Sharma’s Paytm never had a dream debut in the stock market. The shares lost over 27 per cent on the day of their debut and are currently down more than 65 per cent when compared to their issue price of Rs 2,150. 

Much has been said about the regulatory headwinds and profitability concerns that the company faces. These two factors have made stock market investors quite wary about investing in the company. 

Global financial major Citi, however, believes that these concerns are “too pessimistic” and has initiated coverage with a buy rating and a target price of Rs 910 – an upside of over 34 per cent from the current market price.  

Citi believes that the valuations look attractive and has priced in most of the downside. 

“The stock has declined 70 per cent since IPO, in-sync with global fintech de-rating in the last six months, compounded by potential regulatory headwinds and concern about profitability in the payments vertical. We think these views may be too pessimistic and at CMP (current market price), valuations look attractive & pricing in most of the downside,” stated the report. 

More importantly, it adds that the company can upscale and look at profitability as well. 

“We think Paytm has several potential levers to drive scale and improve profitability substantially, leveraging its high-frequency user base of 71mn MTUs (up 41 per cent YoY in FY22) and 25mn+ merchants,” added the report. 

MTU refers to monthly transacting users. 

The bullish stance on Paytm comes only a month after another global financial major – Macquarie – slashed its price target on Paytm for the second time in quick succession. 

Macquarie attributed the move to regulatory headwinds including falling probability of getting a banking licence. 

It had initiated coverage on the stock in November last year with a target price of Rs 1,200, which was cut to Rs 700 in February this year and was further slashed to Rs 450 in March. 

On Tuesday, shares of Paytm were trading around 2.14 per cent higher at Rs 676 at 9:33am.

Also read: Paytm Faces Fresh Challenges

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