Paytm Stock Rises on Strong Operations and MSCI Inclusion Despite Profit Drop

One 97 Communications Limited, the parent company of Paytm, saw its shares trade nearly 4% higher on Wednesday morning, despite announcing a significant drop in its net profit for the second quarter of FY26 (July to September). The company reported a net profit of Rs 21 crore, a stark contrast to the Rs 939 crore profit recorded in the same period last year. This year-on-year profit comparison was heavily influenced by a one-time gain of Rs 1,345 crore from the sale of its movie ticketing and events business to Zomato in the prior year.

Despite the headline profit figures, Paytm's operational performance demonstrated resilience. Revenue from its core business segments increased by 24% to Rs 2,061 crore, up from Rs 1,659 crore in the previous year's quarter. Concurrently, total expenses were reduced by 8.15% to Rs 2,062 crore, reflecting the company's ongoing efforts in cost optimization and efficiency drives. The financial results also included a one-time Rs 190 crore impairment loss related to a loan extended to its online gaming joint venture, First Games Technology Private Limited. This write-down occurred after the Promotion and Regulation of Online Gaming Act 2025 came into effect, prohibiting online gaming and leading the company to value the joint venture at zero.

Impact The market's positive reaction, indicated by the stock price increase, suggests investors are prioritizing the growth in Paytm's underlying business over the one-off items affecting statutory profit. Further positive sentiment stems from the news that Paytm will be added to the MSCI Global Standard Indexes, effective November 24. This inclusion is anticipated to attract significant foreign portfolio investment, with analysts estimating inflows of around $1.46 billion into the Indian market from index-tracking passive funds. Although Paytm continues to face regulatory scrutiny, its improving financial fundamentals and the credibility boost from its inclusion in global indexes appear to be driving investor confidence.

Difficult Terms: * One-time gain: A profit earned from an event or transaction that is not expected to recur regularly. * Impairment loss: A loss recognized when the carrying amount of an asset exceeds its recoverable amount, often due to a decline in value or obsolescence. * Joint venture: A business arrangement where two or more parties agree to pool their resources for the purpose of accomplishing a specific task or business activity. * MSCI Global Standard Indexes: A widely used set of global equity indexes maintained by MSCI Inc., designed to measure the performance of large and mid-cap segments of developed and emerging markets. Inclusion in these indexes can lead to increased investment from passive funds. * Foreign investment: Investment made by an investor from one country into assets or businesses in another country.