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Views on One 97 Communication (Paytm) comprehensive con call By  Mr. Shivaji Thapliyal, Head of Research and Lead Analyst, Yes Securities

“We had started with a SELL rating for One 97 Communications (Paytm) at the time of its IPO. We have a still less-than-bullish ADD rating on the stock and have never put a BUY rating on it.

To put things into perspective, as recently as the 2Q result call, Paytm has guided the following on loan growth: (1) Personal loans would remain muted for 2 more quarters and a 30-40% YoY growth can be expected (2) Merchant loans growth will be healthier and in excess of 50-60% and (3) On a blended basis, total credit growth would be 40-50%. This guidance itself called for a material slowdown from FY23 levels.

Now, in today’s call, Paytm has stated that (1) For personal loans, the growth would 15-20%, which is materially lower than the earlier guidance in the 2Q call (2) For merchant loans, the growth would be 30-45%, which is also materially lower than the earlier guidance in the 2Q call (3) For postpaid loans, disbursement run rate is expected to halve, which is a significantly material downward revision. 

We note that Paytm has flagged that the impact on profitability would be lower given that postpaid is a business of lower profitability. However, today’s commentary, in a sense, calls into question the broad thesis that Paytm was fast transforming from a Payments-focused company to a Loan distribution-focused company. The key question to ask is what proportion of its overall customer base would Paytm be ultimately be able to convert into loan customers in the long-run.”

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