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Paytm will be operationally profitable in six quarters: Sharma

Vijay Shekhar Sharma linked the vesting of the stock awards to him to the payments company’s market value exceeding the IPO level.  (Photo: Reuters)Premium
Vijay Shekhar Sharma linked the vesting of the stock awards to him to the payments company’s market value exceeding the IPO level.  (Photo: Reuters)

Paytm’s stock has to more than triple from the current level before Sharma can vest his substantial stock grants. Shares of One 97 Communications, which operates the Paytm service, have crashed since its listing in India’s biggest IPO last year

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MUMBAI : Paytm, whose shares have plunged 70% from its initial share sale price, said it expects to become operationally profitable in six quarters even as its founder, Vijay Shekhar Sharma, linked the vesting of the stock awards to him to the payments company’s market value exceeding the IPO level.

“Against the backdrop of volatile market conditions for high-growth stocks globally, our shares are down significantly from the IPO price," Sharma said in a letter to shareholders on Wednesday. “Rest assured, the entire Paytm team is committed to building a large, profitable company and creating long-term shareholder value. Aligned with this, my stock grants will be vested to me only when our market cap has crossed the IPO level on a sustained basis," Sharma, who is also chief executive officer of Paytm, added.

Paytm’s stock has to more than triple from the current level before Sharma can vest his substantial stock grants. Shares of One 97 Communications Ltd, which operates the Paytm service, have crashed since its listing in India’s biggest IPO last year. Investors baulked at its expensive valuations and lack of a clear path to profitability.

The letter to shareholders was notified to the country’s stock exchanges, along with Paytm’s quarterly update on operating performance, in which Sharma said he expects Paytm to be operationally profitable in the next six quarters.

Sharma’s comments on the company’s path to profitability and the business growth numbers notified by the company lifted Paytm’s stock by nearly 5%. The stock ended trading on Wednesday at 639 on BSE, up 4.9%.

Paytm sold shares to the public in November at 2,150 each. It had a market capitalization of nearly 1.4 trillion ($18.6 billion) at the IPO price, which has since reduced to 41,443 crore ($5.52 billion). Public shareholders have raised concerns about the company’s path to profitability as the payments market in India remains crowded with competition from deep-pocketed rivals such as Google Pay and Walmart’s PhonePe.

Moreover, the company’s loss for the quarter ended December widened to 778 crore from a year earlier, despite a 90% jump in revenue. In the September quarter, Paytm’s loss widened to 473 crore, even as it reported a 64% growth in operating revenue.

Many brokerages have slashed their target prices on the stock. In a recent report, Macquarie slashed Paytm’s 12-month target to 450 from 700 in January.

Macquarie, in January, had also cut Paytm’s FY21 to FY26 revenue growth estimates to 23% on a compounded annual growth rate basis from 26% earlier. Moreover, the brokerage said Paytm has limited potential to scale distribution business for merchant loans. To be sure, Paytm is not the only new-age technology company trading at multi-month lows.

PolicyBazaar’s parent PB Fintech Ltd, food delivery and restaurant aggregator platform Zomato Ltd, Nykaa’s parent FSN E-Commerce, among others, too, are trading significantly below their IPO prices.

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