Paytm shares rally nearly 11% in a week. Is the worst behind?

The shares of Paytm seem to be recovering from the pressure faced due to the regulatory actions on the company as the stock has surged 10.8% in the last one week amid positive developments for the company.

One97 Communications-held Paytm reported a net profit of Rs 928.3 crore for the quarter ended September 2024, against a loss of Rs 290.5 crore in the corresponding quarter of the previous fiscal year, due to a one-time gain.

The one-time gain of Rs 1,345 crore from the company’s sale of its entertainment ticketing business to Zomato, which helped in bolstering the company’s balance sheet in the said quarter.

Additionally, another sigh of relief came in for the company after the National Payments Corporation of India (NPCI) granted the approval to onboard new UPI users, which resulted in a loss of market share for Paytm.

With this rally, is the worst behind?

“From a business perspective, new UPI account onboarding is very-very crucial because they have seen a slippage of almost 30% from the peak MTUs that they were having. So, getting the power to win back some of the existing as well as now a new customer with this NPCI approval would definitely enhance the MTU profile, which is required to ensure the sustained high growth,” said Rahul Jain of Dolat Capital.

Other than the business factor, this is also a big clearance of the overhang since there are so many regulatory tussles that the company has faced in the past. The announcement on the payment aggregator clearance and the NPCI clearance is a big positive for Paytm as this would boost growth as well as the perception of the business.

Jain believes that there is a clear business improvement that has been seen in the second quarter. There was significant growth as well as improvement in the profitability side.

The company has already identified Q4 to be a quarter when they become adjusted EBITDA positive, where the company is likely to report the numbers which they reported before all of these challenges started coming in Q3 of last year.

“So, it is kind of a one-year hiatus and they are back to where they were ex of one or two products. So, yes, there is no reason why it should not go back to where it was,” Jain further added.

On charts, the stock has managed to come and sustain above all its significant short, medium and long term exponential moving averages and is down by only 18% from its high of Rs 952, made on October 31 last year.

Paytm has been making higher top - higher bottom formation on weekly scale and rallied from Rs 310 to Rs 772 zones in the last six months. It has more than doubled in the last 6 months and supports are gradually shifting higher.

“The stock is holding well above its 50 DEMA on a daily scale and holding well above its rising support trend line. On the weekly scale it has formed a rounding pattern and shows signs of strength even after profit booking decline in the broader market,” said Chandan Taparia, Senior VP, of Equity Derivatives & Technicals, Wealth Management at Motilal Oswal.

Taparia further suggests maintaining a bullish stance on the stock until it holds above the Rs 675 zone, towards Rs 800-865 zone.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)