Paytm shares hit six-month high on rising monthly users, growing number of payment devices and rising revenue

Shares of Indian digital payments company Paytm jumped more than 6% on Monday to their highest levels in nearly six months, after the company’s parent, One 97 Communications Ltd, posted an increase of 89 % of its quarterly turnover.

A higher number of monthly users, additional payment devices and more loan disbursements boosted the company’s revenue to Rs 1,680 crore from Rs. 891 crore last year.

Investors appeared to show little response to the company’s broader loss of rupees. 644 crore released in its quarterly update after market close on Friday.

Paytm, which competes with Google’s payment app and Walmart’s PhonePe in India’s digital payments market, said it was on track to achieve operational profitability by September 2023.

“The notable impression in the results was a strong gross margin increase in the payments business, driving contribution margins to expand to 13 basis points,” JP Morgan analysts said in a note on Monday.

The company’s processing fees, backed by China’s Ant Group and Japan’s SoftBank Group, fell 10.4% to Rs. 694 crore sequentially.

“Management has clarified that it can negotiate better deals with its banking partners and has streamlined some low-margin online merchant accounts, which has resulted in lower payment processing fees,” Macquarie analysts said in a rating.

Shares in the company rose 6% to Rs. 830, as of 06:48 GMT (12:18 IST).

“Earlier this year, we shared that we would achieve operating profitability by September 2023, driven by better monetization, as well as moderate cost growth. The results for the first quarter of fiscal 2023 show that our strategy is firmly in place, with targeted improvement to unit economics, better expense management, and a growing mix of higher-margin businesses (such as financial services and trading) guiding us down the path profitability,” the company said on Friday.


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