Macquarie's target on Paytm raises questions on its reporting

New Delhi: It has been almost a year since One97 Communications Limited (OCL) that owns the brand Paytm, India's leading digital and financial services company and the pioneer of QR and mobile payments, got publicly listed on the stock markets. On the morning of its listing, a foreign institutional brokerage firm, Macquarie Research, had initiated coverage for the stock, raising questions about the timing of the report. The research firm had not released any such reports for earlier internet IPOs like Zomato, Nykaa and Policybazaar. Moreover, this was the first time that a research firm published a price pitch for a company before it even got listed. This looks like a SEBI violation to many but no one is talking about it.

In subsequent reports, Macquarie continued to flag an 'underperform rating' for the Paytm stock. The research firm's narrative has been consistently negative for Paytm, even as the company continues to achieve new milestones in all its businesses. This constant narrative makes one question the intent and agenda of the research firm.

Macquarie had grossly underestimated Paytm's loyal customer base, rapid growth in high-margin businesses, technology products creating categories, management depth, and unflinching commitment to building for India- by empowering its customers through technology, ecosystem and finance. Macquarie has failed to understand the business and revenue model of Paytm.

Contrary to Macquarie's analysis, most global brokerages like Goldman Sachs, JP Morgan, Citi and others continue to back Paytm's journey towards profitability. All of these brokerages have maintained a 'Buy' rating for Paytm, supported by the company's growth in key businesses like payments and loan distribution, leadership in multiple market segments and growing consumer and merchant base.

Despite the brokerage's grim coverage of the stock, which led to some amount of initial negativity, Paytm continues to be one of the top picks among new-age internet stocks, backed by strong financial results.

Macquarie expected the company's FY22 revenue to be 4,487 crore.Post the company's Q3FY22 results, Macquarie revised its estimate to 4.960 crore. However, Paytm's revenue still came in higher than what the brokerage had pegged.

In the full financial year FY22, Paytm's revenue grew to Rs 4,974 Cr, marking a growth of 77% year-on-year, while contribution profit grew 313% year-on-year to Rs 1,498 Cr. Paytm also reported an EBITDA improvement of 8% to {1,518 crore in FY22 from {1,655 crore in FY21, helping the full-year margin improve to 31% of revenues from 59% of revenues in FY21. This shows that the company is reducing its EBITDA loss (before ESOPs) every quarter and it has achieved it without compromising on its growth plans, evident by the growth in its full year and quarterly

revenue.