Paytm Surges on Investec Buy Call Amidst Investor Crosscurrents

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AuthorKavya Nair|Published at:
Paytm Surges on Investec Buy Call Amidst Investor Crosscurrents
Overview

Paytm stock jumps 3% on Friday, January 23rd, extending recent gains. Brokerage Investec initiated coverage with a 'Buy' rating and a ₹1,550 price target, citing strong tech capabilities and merchant relationships. Despite this bullish outlook, domestic mutual funds collectively reduced their holdings in Q4, the first such divestment since IPO, while retail investors continued selling.

Paytm's stock price saw a significant boost, rising 3% on Friday, January 23rd, extending its recent upward trend. This surge is largely fueled by brokerage firm Investec, which has initiated coverage with a 'Buy' rating and set a price target of ₹1,550. Investec highlighted Paytm's strong tech capabilities and deep merchant relationships as key drivers for its 'Buy' recommendation, projecting a 23% upside. They anticipate robust revenue growth and significant margin expansion driven by scale and higher-margin services, projecting EBITDA margins to reach 24% by FY28.

However, this positive analyst outlook is contrasted by actions from domestic institutional investors. BSE filings show that mutual funds collectively reduced their stake in Paytm during the October-December quarter. This marks the first instance of mutual funds trimming their holdings since Paytm's IPO in November 2021. Mutual fund ownership now stands at 14.96%, down from 16.25%. Additionally, retail investors have continued their selling spree, with their shareholding declining for the seventh consecutive quarter.

Paytm's stock is currently trading around ₹1,298.80, still approximately 40% below its IPO price. The fintech sector is increasingly focusing on sustainable monetization. While competitors like PhonePe lead in UPI transaction volumes, Paytm retains a strong kirana merchant base. Despite the institutional divestment, the overall analyst consensus remains positive, with a majority recommending 'Buy'. Average price targets from various brokerages suggest a potential upside of 20-23%. Investors will be watching Paytm's execution in its credit businesses, AI integration, and its ability to navigate regulatory changes.

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