Paytm Stock Drops 4% as Rs 930 Crore Q2 Profit Fails to Impress Investors
Shares of Paytm parent One 97 Communications fell despite the fintech reporting a Rs 930 crore net profit for Q2FY25, primarily driven by a one-time gain from selling its movie ticketing business to Zomato.
Shares of Paytm's parent company, One 97 Communications, saw a decline of up to 4% on October 22, 2024, despite reporting a Rs 930 crore net profit for the second quarter of FY25. The market reaction was primarily influenced by the fact that the reported profit was largely driven by a one-time gain, leaving investors unimpressed.
Key Highlights:
Q2FY25 Net Profit: Paytm posted a net profit of Rs 930 crore, compared to a net loss of Rs 290.5 crore in the same period last year.
One-time Gain: The profit was mainly due to a one-time gain of Rs 1,345 crore from the sale of its movie ticketing and events business to Zomato.
Sale of Ticketing Business: Paytm sold its movie ticketing business to Zomato for a total consideration of Rs 2,048 crore, as per the agreement finalized on August 21, 2024.
Underlying Performance: Excluding the one-time gain, Paytm would have posted a net loss of Rs 415 crore, higher than the Rs 290.5 crore loss reported in Q2FY24.
Revenue Decline: Paytm's revenue for Q2FY25 fell by 34% year-on-year (YoY) to Rs 1,660 crore. However, sequentially, revenue showed a slight improvement from Rs 1,501 crore in Q1FY25.
Improved Margins: Net payment margin increased by 21% quarter-on-quarter (QoQ), reaching Rs 465 crore, driven by better device realization and growth in gross merchandise value (GMV).
Financial Services Growth: Paytm’s financial services revenue grew by 34% QoQ to Rs 376 crore, boosted by an increase in collection bonuses from merchant loans and improved asset quality trends.
Stock Performance: At 11:06 AM on October 22, Paytm shares were down 3.5%, trading at Rs 700.50 on the National Stock Exchange (NSE). Over the past year, the stock has fallen by 24%, while the Nifty index rose 28%.
Investor Sentiment
While Paytm achieved profitability, the market's focus was on the company's underlying performance, which showed a significant loss without the one-time gain. This led to selling pressure on the stock. The company’s revenue decline and its dependence on one-time gains to report profits raised concerns about its operational strength.
As Paytm moves forward, the company will need to focus on improving its core business operations to sustain investor confidence, particularly given its underperformance compared to the broader market.