On October 16, in the afternoon, the parent company of Aytm, One 97 Communications Ltd, saw a 1% increase in its stock price following an announcement by Goldman Sachs. The investment firm raised its target price for the stock, suggesting that the Noida-based payments company could potentially be the most profitable among India’s internet firms. According to Goldman Sachs analysts, the fintech company led by Vijay Shekhar Sharma is well-positioned to capture a significant portion of India’s digital payments market due to its industry-leading scale and engagement.
Goldman Sachs Foresees Positive Net Income for Paytm in FY25, Despite Regulatory Challenges and Growth Prospects
Goldman Sachs anticipates that Paytm will achieve a positive net income in FY25, which could serve as a catalyst for the stock’s performance. They also noted that Paytm has been facing both headwinds and tailwinds. Some recent regulatory developments have been either neutral or positive for the company. The current stock price of Paytm accounts for several challenges, including merchant discount rate (MDR) caps, a potential decrease in market share, and a slower expansion of its financial services.
Despite these challenges, Goldman Sachs analysts find Paytm’s valuation attractive, especially when compared to its peers in the Indian internet sector, considering the growth prospects. They anticipate continued momentum in Paytm’s lending and payments sectors, with the business model benefiting from strong operating leverage. Additionally, resolving outstanding regulatory issues or partnering with a bank for lending services could further boost Paytm’s performance.
Goldman Sachs Upholds Buy Rating for Paytm, Citing Potential Upside Amid Regulatory Challenges
Goldman Sachs maintains a buy rating for Paytm and believes that the current share price offers an excellent entry point into one of India’s largest and most profitable fintech platforms. Key catalysts for the stock’s future performance include resolving regulatory issues, such as the Paytm Payments Bank onboarding ban, obtaining authorization as a payment aggregator, partnering with a bank for lending, improving profit margins, and expanding the lending book while enhancing credit quality.
On October 12, the Reserve Bank of India imposed a penalty on Paytm Payments Bank for non-compliance with KYC norms and prohibited the onboarding of new customers. Goldman Sachs considers the resolution of this regulatory issue as a crucial factor for Paytm’s stock performance.
In light of Paytm’s strong business model and positive trajectory, Goldman Sachs has raised the target price for the stock to Rs 1,250 per share, implying a 34% upside from the closing price on October 13. As of 2:42 pm, Paytm was trading at Rs 935 on the NSE, representing a 0.2% increase from the previous closing price. The stock has experienced a significant 76% increase in value this year.
