Paytm’s ‘Steady Asset Quality', 'Growth Potential’ Make Motilal Oswal, JM Fin, Others Positive On Stock

The fintech giant’s increased focus on cross-selling to existing loan users who have demonstrated good repayment behaviour is now contributing more than 60% of new disbursements.

Following Paytm's announcement of expanding its credit distribution business to offer higher-ticket personal and merchant loans, most of the brokerage firms have reaffirmed their positive outlook on the company's stock. Notably, JM Financial Services, Jefferies, and Motilal Oswal Financial Services have maintained their "buy" rating on Paytm, it is learnt. 

Bernstein has also expressed positive sentiment towards the company's business, as it believes “Paytm's asset quality is still holding up well”. Bank of America, Morgan Stanley  and Macquarie have retained their rating on Paytm stock. 

Analysts have focused on several key aspects supporting their favorable outlook. The asset quality metrics of Paytm remain steady, and the pick-up in high-ticket personal loans and merchant loans, along with the increase in the number of lending partners, should support steady growth in the medium term, analysts at Motilal Oswal Financial Services, said in a research note after the analyst call. The brokerage firm maintained a 'buy' rating on the stock with a price target at Rs 1,025 per share. 

While Morgan Stanley maintained an "equal-weight" rating with a target price of Rs 830 per share, it is said to have acknowledged Paytm's “strong asset quality” in the personal loan segment and a potential for further growth through new partnerships. The brokerage firm is learnt to have acknowledged that asset quality trends for Paytm remain strong and unchanged.

Bank of America justified its "buy" rating with a target price of Rs 1,165 per share due to the “continued potential of Paytm's high-take-rate lending and subscription-based Soundbox revenue model”. 

Paytm continues to build loan distribution business with a focus on specific personal and merchant loans. In an analysts call on loan distribution business, the company’s management noted that proactive risk calibration (since Q3FY23) along with its lending partners, has been leading to better portfolio metrics. 

The fintech giant’s increased focus on cross-selling to existing loan users who have demonstrated good repayment behaviour is now contributing more than 60% of new disbursements. “We are expanding on high ticket loans. Both merchant and personal, are in existence for three years. There is a large demand for new loans without delinquency where customers and merchants are seeking higher amounts of loan at low interest rates,” the company said.