Mutual funds, retail investors take a liking to Paytm shares, raise stakes in Q3

As per the shareholding pattern, mutual funds’ stake in Paytm increased to 1.73% in Q3FY23 versus 0.47% earlier. Notably, two new mutual funds entered the Vijay Shekhar Sharma-backed stock — taking the total mutual fund shareholders to 21 by end of the December 2022 quarter compared to the previous 19 shareholders.

Furthermore, the shareholding pattern revealed that more retail investors have also jumped on board, with their shareholding increasing by 3.0% to 9.7%.

In Q3, more than 70,000 new investors entered the stock — taking the total number of retail shareholders to approximately 12 lakh in Paytm.

However, in Q3, FDI shareholding dipped significantly to 66.12% in Q3FY23 from 71.49%, mainly because of SoftBank offloading a 4.53% stake. As of now, the Japanese conglomerate continues to own 12.92% of Paytm through its Vision Fund.

On the other hand, foreign portfolio investors (FPIs) shareholding in Paytm also jumped to 6.68% from 0.91%. The total number of FPIs holding the Paytm stock was to the tune of 128 in the third quarter of FY23 — a net addition of 40 new investors in this category from earlier 88 investors.

It has been over a year since Paytm debuted on the stock market. The company’s IPO which was launched between November 18 to 10 in 2021, had subscribed by 1.89 times with strong demand from both retail and institutional investors.

Paytm told Mint that these developments are a clear indication that more Indians believe in Paytm’s ability to deliver profitability without compromising on growth. The increase in domestic investors’ shareholding is a vote of confidence in the company’s future prospects.

Paytm is expected to report another strong quarter in Q3FY23. In its research note, American investment bank and financial services provider, Goldman Sachs expects Paytm’s revenue growth of around 45% YoY in Q3 and a further improvement in adjusted EBITDA losses (by 58% qoq) to -Rs0.7 billion.

Goldman’s note said, ” We believe Paytm’s margin print in 3Q would further increase the street’s confidence around the company’s ability to be profitable in CY23. Paytm’s MTU (monthly transacting users), loan disbursals, and devices deployed continue to surprise us positively, and we have further raised our estimates for these metrics in this note; however,

mix shift towards UPI has also been faster, resulting in cuts to our payment revenue estimates.”

On valuation, Goldman’s note said, “Paytm’s valuation multiples are at a discount to global/India peer group, for a growth outlook that is better or in-line with peer group. Our refreshed analysis suggests Paytm’s current share price is already pricing in multiple headwinds, with the stock trading close to its bear-case implied value; we see risk-reward as skewed to the upside.”

Hence, Goldman reiterated a Buy rating on Paytm (on CL) with a revised 12m SOTP/DCF-based target price of Rs1,120 (was Rs1,100) and believes the current share price continues to offer a compelling entry point into India’s largest and one of the fastest-growing fintech platforms.

Earlier, in the current month, Chinese e-commerce giant Alibaba offloaded around 6.43% stake in Paytm. Alibaba seems to be making an exit from India as it has already sold certain shares in other investments such as BigBasket and Zomato. Paytm is the latest to see a stake sale from this e-commerce player.

On Friday, Paytm shares closed at ₹550.75 apiece up by 3.46% on BSE. The company’s market cap is around ₹35,762.09 crore.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.