Alibaba Group Divests 3.3% Stake in Paytm Parent for INR 1,378 crore
- ByStartupStory | February 11, 2023
Alibaba Group Divests 3.3% Stake in Paytm’s Parent Company, One97 Communications. The Alibaba Group has recently offloaded a portion of its ownership in One97 Communications, the parent company of Paytm, through an open market sale. Alibaba.com Singapore E-Commerce Pvt Ltd disposed of 2,14,31,822 shares, generating a total of INR 1,378 crore. The shares were sold at a price of INR 642.74 each, representing a 9% decrease from the previous day’s closing stock price.
The fintech giant Paytm experienced a drop in its stock price, ending the day nearly 8% lower at INR 650.55 on the National Stock Exchange. The recent stake sale by the Alibaba Group marked the end of the company’s 4-day winning streak, which was fueled by its announcement of operating profitability in the last quarter of 2020.
Over the past 4 trading sessions, Paytm’s shares have seen a significant increase of almost 35%. This recent surge may have prompted the Chinese retailer to sell a portion of its ownership and secure some profits.
In January, Alibaba.com Singapore E-Commerce Pvt Ltd sold a 3% stake in One97 Communications, which brought in INR 1,031 crore. As of December, this affiliate held a 6.3% stake in the company. However, through another affiliate, Antfin (Netherlands) Holding B.V., the Chinese retailer still holds a substantial 25% stake in Paytm’s parent company.
Paytm’s Q3 net loss was reported at INR 392 crore, a significant improvement compared to the previous year’s loss of INR 779 crore. Paytm CEO Vijay Shekhar Sharma expressed confidence in the company’s future growth and financial performance, stating that the company’s focus on operational risk and compliance will lead to the achievement of its next milestone of generating free cash flow.
Paytm’s shares have experienced a significant decline of 70% from its initial public offering price of INR 2,150. Despite this, there are 8 buy recommendations out of 11 analysts covering the stock, with an average target price of INR 915, indicating an upside potential of over 34%, according to Trendlyne data. Last month, Paytm also announced a share buyback program worth INR 850 crore.
Paytm’s recent quarterly earnings report even managed to impress the global brokerage firm Macquarie, known for its conservative outlook on the company. It upgraded the stock and raised its target price by 80% to INR 800, reflecting a positive change in its view of Paytm. According to Macquarie analysts Suresh Ganapathy and Param Subramanian, the positive surprise in Paytm’s distribution of financial services revenue and successful control of expenses and charges played a key role in the revised target price. The target price of INR 2,150 previously held by Macquarie has now changed, reflecting the stock’s current price around INR 600.
Other global brokerages also have their own price targets for Paytm. Goldman Sachs has a target price of INR 1,150, Citi has set a target of INR 1,061, and BofA Securities has a target of INR 730.
Paytm released its monthly business update for January and reported a 29% year-over-year increase in average monthly transacting users, reaching 89 million. The company also highlighted its continued growth in offline payments, with 6.1 million merchants now subscribing to pay through Paytm’s payment devices, a 0.3 million increase from January 2023.
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