In contrast to rival PayU, Paytm is rises as Citi wagers on faster client growth
- ByStartupStory | November 26, 2022
On November 25 (Friday), Paytm’s shares increased more than 5% to Rs 464.80 on the BSE after Citi Research stated in a note that it anticipates Paytm gaining a larger market share in digital payments and experiencing faster growth in its active customer base in the BNPL segment than its competitor PayU. The research firm has assigned the Paytm company a “buy” rating and set a target price of Rs 1,055.
“Paytm has gained market share in digital payments vs. PayU, although the growth appears comparable on an MDR-generating TPV (total payment value) basis at 59 percent YoY for PayU vs. 52 percent YoY (Paytm) for January-June 2022. In the BNPL segment, Paytm is seeing faster growth in its active customer base vs. PayU’s Lazypay. Lazypay’s reported loss rate has increased year to date to 3.1 percent (+30bps versus the calendar year 2021) – something to watch out, for the broader BNPL space in India (Paytm has reported stable asset performance across its lending partners’ portfolio with loss rates at 1.1-1.3 percent for the postpaid BNPL product),” the brokerage said in a research note on November 23, 2022.
“We note that Paytm’s business in the lending space is distribution (no balance sheet exposure), and therefore its revenue and cost structures are commission-based. Paytm is trading at 5x FY24E enterprise value/contribution profits (4x EV/gross profits). We acknowledge overhang risks from further selling by existing pre-IPO shareholders and that fintech is in a competitive space, but at these valuations, those risks are overdone,” it added.
Furthermore, on the Indian payments business, Prosus, the PayU parent, said, “In India, our largest payments market, TPV grew 59 percent to $28 billion, and revenue increased 48 percent to $183 million, following increased digitalization in e-commerce, financial services, and bill payments, and a rebound in post-pandemic travel.”
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