Paytm Investors Not In A Hurry To Sell: Analysts

Paytm's pre-IPO investors, which include likes of Warren Buffet's Berkshire Hathway, SoftBank and Alibaba, do not seem to be in a hurry to exit India's leading digital payments brand as they continue to believe in its long-term prospect, analysts said.

On Tuesday, 86 per cent of Paytm's shares became free to trade after the end of the lock-in period, allowing investors to sell shares that haven't yet been allowed onto the market.

Market participants have been speculating on Paytm, post-expiry of lock-in for pre-IPO investors.

"Paytm's lock-in expiry had no impact on the share price as the company's robust performance continues to impress investors," Avinash Gorakshakar, Director, Research, Profitmart Securities, said about Paytm.

Alibaba Group Holding Ltd and its fintech affiliate Ant Group Co are the biggest shareholders in One97 Communications Ltd, Paytm's parent company. Alibaba.Com Singapore E-Commerce Private Limited holds 6.26 per cent of One97 while Antfin (Netherlands) Holdings B.V. has another 24.88 per cent.

SoftBank owns 17.45 per cent through SVF India Holdings (Cayman) Limited while Berkshire Hathaway Inc's BH International Holdings holds 2.41 per cent.

Paytm's pre-IPO investors like Warren Buffet, SoftBank, Elevation Capital, and Alibaba are long-term investors.

SoftBank's Masayoshi Son is reportedly not in a hurry to exit from its investments like Paytm, PB Fintech and Delhivery so as to avoid triggering panic selling.

Rahul Sharma, co-founder, Equity99 Advisors, said, "The marquee investors of Vijay Shekhar Sharma-led digital company are in no hurry to sell."

One97 shares fell over 3.5 per cent to Rs 603.95 on Wednesday, far below its IPO price of Rs 2,150 a share.

Paytm has impressed its investors with continued strong performance. The company recently announced Q2 FY23 financials and posted a 76 per cent year-on-year growth in revenue to Rs 1,914 crore.

Meanwhile, the company's losses reduced by 11 per cent on a sequential basis. The company's contribution profit surged 224 per cent year-on-year to Rs 843 crore.

On Monday, the company announced that in its rapidly growing lending business, it had disbursed 3.4 million loans in October, registering a y-o-y growth of 161 per cent.

The value of total loans disbursed in October grew to Rs 3,056 crore (USD 407 million, year-on-year growth of 387 per cent). Paytm's leadership in offline payments strengthened further with its total merchant subscription devices deployed increasing to 5.1 million. For October, the total merchant GMV processed through Paytm aggregated to Rs 1.18 lakh crore (USD 14 billion), registering a y-o-y growth of 42 per cent.

In fact, this continued growth has also brought Paytm a thumbs up from major brokerages like JP Morgan, Morgan Stanley, Goldman Sachs, Dolat Analysis & Research Themes, and CITI.

Goldman Sachs analysts Manish Adukia, Rahul Jain and Harshita Wadher said the lock-in expiry (86 per cent of Paytm's outstanding shares) may represent an overhang on the stock but recommended buying Paytm shares given the company's progress in boosting revenue and moving toward profitability. "We expect Paytm to deliver 50 per cent revenue growth for the next few quarters and continue its transition from an erstwhile payments-only business to one with a strong financial services portfolio."

Founder Vijay Shekhar Sharma earlier this week wrote to shareholders seeking to quell market anxiety over the shares.

"One year ago, we made our way to the public markets. We are aware of the expectations that Paytm carries, and I assure you that we are on the right path to profitability and free cash flows," Sharma said. "Our journey to build a scalable and profitable financial services business has just started."