By
Tolu Ajiboye
February 9th, 2024
Despite the immediate bearish sentiment engulfing Paytm shares, analysts are still optimistic that the company will see brighter days ahead.
One 97 Communications Ltd (NSE: PAYTM), the parent company of one of India’s financial technology platforms Paytm is recording one of its worst days as a publicly listed company following the massive decline of its shares.
The company’s shares are trading at 475.55 Indian Rupees at the time of writing. They are down 11.44% over the past 24 hours. Notably, the shares are now trading at 77% below the IPO price of 2,150 rupees ($26.3)
The fall in the shares followed the sell-off from key investors after the mandatory one-year lock-up embargo was lifted. Paytm went public last year and according to Indian laws, investors need to hold onto their stocks for 12 months before being allowed to sell them. With Softbank Vision Fund (SVF) India Holdings one of the biggest investors at the time, the market is reacting to the $200 million worth of its stake it sold off last week.
Prior to this time, Softbank holds approximately 17.45% of One 97 Communications Ltd and following the selloff, its stake remains at 12.93%. According to filings, investors who bought up the Softbank stake include Morgan Stanley Asia Singapore Pte, Societe Generale – ODI, and BOFA Securities Europe SA.
The current share performance of the company has remained a source of concern to investors. However, Vijay Shekhar Sharma, the founder of Paytm, reassured investors last week that the firm is working “on the right path to profitability and free cash flows.” He added, “Our journey to build a scalable and profitable financial services business has just started.”
At the moment, the broader Indian fintech space may need to wade off the contagion that the current slip-up in Paytm’s shares will cause. As one of the dominant payment service providers in the country, the trends charted by Paytm can be somewhat reflective of the general sentiment in the ecosystem.
Paytm Shares Still Have Positive Sentiments from Analysts
Despite the immediate bearish sentiment engulfing Paytm shares, analysts are still optimistic that the company will see brighter days ahead.
While Analysts at BofA Securities have a ‘Neutral’ recommendation on Paytm, the analysts believe the core fundamentals of the company for which it has continued to expand its product suite. Paytm has a diversified product stream bordering on payments, insurance, and lending among others.
“In our view, the lending business provides an upside optionality to Paytm giving Paytm room to scale up subject to execution,” analysts said in a Q2 result update.
Paytm still dominates the Indian digital payment market with approximately 337 million consumers and 21 million plus merchants. The company’s founder, Sharma has reiterated that one of the focuses he and his executives have is to push the company to hit $1 billion in annual revenue by the end of this fiscal year in March.
The expectations of future impressive milestones may make this current share onslaught a temporary one.