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Paytm now a buy for CLSA
November 29, 2022
CLSA has upgraded its outlook on the stock of payment services company Paytm from ‘sell’ to ‘buy’, as per a report released by the foreign brokerage firm on November 28.
The recent price correction makes risk-reward “favourable”, CLSA said, adding that the company has more than $1 billion cash on the balance sheet.
“While our interactions with several investors over the past four months suggests some discomfort or uncertainty on scaling up the lending business, we think that the stock warrants a look now,” it said.
The brokerage is of the view that Paytm’s cash burn should end in “another 4-6 quarters”. The net take-rate “has improved by 13 bps”, but fixed cost absorption remains key, it added.
After analysing the above factors, CLSA said it has decided to “upgrade (Paytm) to buy from sell with a TP (take profit) of ₹650”.
The key near-term risk, however, remains the continued selling by pre-IPO investors, it noted.
Over the past two weeks, Paytm’s share price has corrected 25-30 percent on the back of selling by a large shareholder, the report pointed out.
Shares of One 97 Communications, which runs Paytm, slumped to an all-time low last week, and crashed to of ₹476.65 at the BSE on November 22.
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