Motilal Oswal reiterates ‘Buy’ on Paytm, sees another 21% rally

Brokerage Motilal Oswal has reiterated a 'Buy' on One 97 Communications stock, estimating gains of over Rs 180 per share or 21% from current levels. The brokerage has fixed a price target of Rs 1,050. The stock currently trades at Rs 868 apiece.

The stock has delivered returns of 34% since Motilal Oswal initiated coverage on the stock in April 2023 following Paytm's strong business momentum.

The fintech major's ability to maintain strong portfolio quality amid rapid disbursement growth stood out as a trigger for Motilal's buy rating, though it has warned investors of supply overhang from some of the large shareholders along with evolving regulatory environment.


Motilal’s fresh take on Paytm shares comes on the back of BofA Securities' views on the stock in the previous week. The foreign brokerage also recommended a 'Buy' rating on One 97 Communications shares for a price target of Rs 1,020.

Motilal Oswal, in a note, said that the lending business has demonstrated robust traction in loan disbursals with the total number of loans disbursed surging 4.6X year-on-year (YoY) in FY23 versus 4.4X in FY22.

The company was on track to report EBITDA breakeven in 2HFY25, Motilal further said, highlighting that the company had earlier reported an adjusted EBITDA breakeven, one year ahead of its guidance.

Triggers for growth:
1) Business momentum remains robust with gross merchandise value (GMV) growing 35% YoY to Rs 2.65 trillion during April-May 2023 (55% YoY growth in FY23).

2) Quarterly merchant addition run-rate of 1 million+ with the total number of devices deployed, surging to 7.5 million in May 2023. It was a 118% YoY growth.

3) Sustained growth in the deployment of devices will enable robust transaction volumes and drive healthy growth in merchant and consumer loans.

4) From an annualised 1QFY23 run-rate of Rs 22,200 crore value of loans, the company has reached an annualised run-rate of Rs 60,000 crore in April-May 2023, and the same is tracking higher than our estimates.

5) Merchant loans also improved in May 2023 after a drag in April 2023, due to a technology system upgrade at one of the leading partners.

The stock fell nearly 2% on Monday amid profit booking.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)