Shares of One97 Communications, the parent entity of digital payment app Paytm, climbed 11.45% to ₹887.70 apiece in early trade on Monday, reaching a six-week high. 

This came after the company, in an exchange filing, said the company’s founder, MD and CEO Vijay Shekhar Sharma, entered into an agreement to purchase a 10.30% stake in Paytm from Antfin (Netherlands) Holding BV through an off-market transfer.

On the closing of this transaction, Sharma’s shareholding in Paytm (direct and indirect) will increase to 19.42%, whereas Antfin’s shareholding will reduce to 13.5%. The acquisition will be made by Sharma’s 100%-owned overseas entity, Resilient Asset Management BV, based in the Netherlands, the company said. 

“As per the agreement executed between the parties, Resilient will acquire ownership and voting rights of the 10.30% block. In consideration for the acquisition of the 10.30% stake, Resilient will issue Optionally Convertible Debentures (OCDs) to Antfin, which in turn will allow Antfin to retain the economic value of the 10.30% stake, demonstrating Antfin’s continued confidence in the business potential,” Paytm said in a regulatory filing.

Accordingly, no cash payment will be made for this acquisition, and neither will any pledge, guarantee, or other value assurance be provided by Sharma, directly or otherwise. The management and control of Paytm will remain unchanged, with Sharma continuing as Managing Director and CEO, and the existing Board remaining intact. 

Meanwhile, the company’s shares have bounced back strongly after a lacklustre performance in CY22. So far in 2023, the shares have rallied nearly 60%, spiking from ₹531 to ₹849.

Stock price chart of One97 Communications.

For the June-ending quarter, the company showcased an improvement in its financial performance, with losses narrowing to ₹358.4 crore compared to a net loss of ₹645.4 crore in the same period last year.

However, sequentially, the losses were higher than in the preceding March quarter, which stood at ₹168 crore. This was due to a rise in the company’s indirect expenses to ₹1,220 crore, reflecting a YoY increase of 22%.

The rise in indirect expenses was on the company’s expected lines due to higher employee costs due to annual appraisals, expansion of sales and technology teams, and higher investment in marketing during IPL.

The consolidated revenue from operations during the quarter rose by 39% YoY to ₹2,342 crore. The company’s payment business continues to scale, led by an increase in GMV and higher subscription revenue. In Q1 FY24, payments revenue grew by 31% YoY to ₹1,414 Crore.

The revenue from financial services and other segments witnessed impressive growth, surging by 93% YoY to reach ₹522 crore in Q1. The revenue from its commerce and cloud business segments improved by 22% to ₹405 crore.

Following the company’s Q1FY24 performance, brokerage firm Motilal Oswal maintained its ‘buy’ rating on the stock with a target price of ₹1,000.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.

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