India's Paytm jumps over 7% on ahead-of-schedule operating profit

Man rides a bicycle past a bus stop with Paytm advertisements in Mumbai
A man rides a bicycle past a bus stop with Paytm advertisements in Mumbai, India, November 10, 2021. REUTERS/Niharika Kulkarni/Files

BENGALURU, Feb 6 (Reuters) - Shares of India's Paytm (PAYT.NS) rose as much as 7.4% on Monday, in their biggest intraday jump in nearly two months after the fintech company unexpectedly posted its first-ever quarterly operating profit as a listed firm.

Paytm posted earnings before interest, taxes, depreciation, and amortization, or EBITDA, of 310 million rupees ($3.8 million) for the October-December quarter, nine months ahead of its stated target of September 2023.

"This was mainly on the back of rising mix of high-margin lending revenue, improving merchant subscription, reducing payment processing and promotional charges," BofA Securities analysts said in a note.

There has been a cloud over the ability of the company, which is backed by China's Ant Group and Japan's SoftBank Group Corp (9984.T), to turn profitable ever since its initial public offer (IPO), still India's biggest ever, in November 2021.

That has led to a 75% tumble in the stock since the IPO.

While Paytm still posted a net loss for the third quarter, it nearly halved due to surging demand for buy-now-pay-later (BNPL) loans at its fast-growing financial services business.

While BNPL loan disbursement rocketed four-foldin the quarter, net margins in Paytm's digital payments division more than doubled to 4.59 billion.

The eponymous payments business had a 14.7% share of India's digital payment space in December, lagging Walmart-backed PhonePe's 46% share and Alphabet Inc-owned Google Pay's (GOOGL.O) 34% share, according to official data.

Nonetheless, turning EBITDA positive will be a near-term catalyst, said BofA, keeping its "neutral" rating on the stock.

"Management's commentary around sustaining along the profitability path will be key," the brokerage said.

Paytm has also previously said it expects to become free cash flow positive this year.

The stock was last up about 4.7% at 550 rupees as of 10:53 a.m. IST. It had slid 3.6% this year through Friday. ($1 = 82.4050 Indian rupees)

Reporting by Nandan Mandayam in Bengaluru; Editing by Savio D'Souza

Our Standards: The Thomson Reuters Trust Principles.