'Confident On Long-Term Trajectory', Paytm To Turn Highly Profitable Starting FY25, Say Analysts At Dolat

Paytm said its focus would move towards higher-ticket personal loans, growing merchant loans (MSME), and expanding lending partner base

Paytm said it is increasing focus on cross-selling to existing loan users who have demonstrated good repayment behaviour, and this is now contributing more than 60 per cent of the new disbursements.

Source : Paytm

Mobile payments company Paytm, in an update on the outlook of its loan distribution business, has announced that it will further expand its business to offer higher-ticket personal and merchant loans. Analysts at domestic brokerage firm Dolat Capital noted that "we remain confident on the long term trajectory of Paytm". The company said these loans will be targeted at lower-risk and high-credit-worthy customers, in partnership with large banks and NBFCs.

Hereon, Paytm said its focus would move towards higher-ticket personal loans, growing merchant loans (MSME), and expanding lending partner base. Given the “large number of use cases (both on need and want)”, a considerable customer base (MTUs of 95mn+), and “robust tech platform”, Dolat Capital believes Paytm can compound its revenues by 8x over next decade and would turn highly profitable starting FY25E and thus believe DCF valuation as an ideal tool to value real long-term potential of the business.  

Analysts at Dolat Capital expect Paytm to turn PAT-profitable in FY25E and reach a steady state EBIT Margin of 15.5 per cent over FY31-FY40E. Dolat Capital seems bullish on Paytm stocks with a 'buy' rating. Moreover, it remains upbeat as Paytm continues to prioritise portfolio quality, improving lender partner trust while also adding new partners consistently.

With a focus on prioritising repeat customers, Paytm said it is increasing focus on cross-selling to existing loan users who have demonstrated good repayment behaviour, and this is now contributing more than 60 per cent of the new disbursements. Paytm noted that it currently has seven NBFC partners for loan distribution, and that they are in the process of integrating one large bank and two large NBFCs, which is likely to be completed during Q4FY24 and Q1FY25E. Additionally, Paytm now has three credit card partners and integration with one more bank is in process.