Paytm shares nosedive 6% on Alibaba block deal, but there’s a catch

On BSE, Paytm shares closed at ₹542.25 apiece down by ₹37.25 or 6.43%. The stock has plummeted by over 8.8% on Dalal Street with an intraday low of ₹528.35 apiece.

Alibaba seems to be making an exit from India as it has already sold certain shares in other investments such as BigBasket and Zomato. Paytm is the latest to see a stake sale from this e-commerce giant.

Sources close to the development told Mint that “there was a big movement in Paytm’s stock today as a block deal took place where 2,59,930 shares were sold at ₹535.90 worth 13.93 crore rupees.” These sources confirmed that Chinese group Alibaba is behind the deal, selling up to 3.1% of its total equity of about 6%.

However, the sources also said that Alibaba’s affiliate company, Ant Financial is not going to sell anytime soon in Paytm.

They further added, “this could come as a good news for investors, with Chinese shareholding reducing their stake it will benefit the company in their FDI aspect. In fact, immediately after the block deal (where the share price fell to ₹534), it soon recovered to ₹548.”

In the past few days, Paytm shares have made a significant upside after there were several good news floating about the company. Before the block deal, between January 1-11, the company’s stock gained by nearly 9% on Dalal Street.

Recently, the company’s associate Paytm Payments Bank received RBI approval to appoint Surinder Chawla as its Managing Director and CEO.

Also, as per the regulatory filing on Wednesday, a total of 49,92,646 equity shares have been bought back as of January 11, 2023. The company has launched its buyback offer to the tune of 10,493,827 equity shares at a buyback price of ₹810 per equity share aggregating to ₹850 crore. The proceeds from the IPO are not being directed toward the share repurchase plan.

During the Q3FY23, Paytm’s loan disbursements continued to scale up to ₹9,958 crore registering a growth of 357% YoY while cumulative 10.5 million loans were up by 137% YoY. In December month alone, the company disbursed loans to the tune of ₹3,665 crore up by 330% YoY, and 3.7 million loans up by 117% YoY.

Further, in Q3FY23, the company’s Paytm Super App continues to see growing consumer engagement with the average MTU at 85 million, registering a growth of 32% YoY. Also, its total merchant GMV processed through the platform for the quarter rose by 38% YoY to ₹3.46 lakh crore.

In its research note dated January 11, American financial services company, Morgan Stanley highlighted that Paytm will be key beneficiary of the latest approval from the government for the incentive scheme of ₹26 billion for promoting f RuPay Debit Cards and low-value BHIM-UPI transactions (P2M) for FY23.

Under the scheme, acquiring banks are provided with a financial incentive for promoting point-of-sale and e-commerce transactions using RuPay debit cards and BHIM-UPI transactions.

Also, Vijay Shekhar Sharma, Founder, CEO & MD of Paytm, tweeted, “Huge commitment by GOI Cabinet to push Digital Payments thru UPI and RuPay!,” adding, “The Digital India mission of our government will bring long-term benefits to our economy.”

Morgan Stanley in its note said, “On our estimates, PAYTM would have received ~5-7% of the F22incentive, and assuming a similar share for F23, this would represent ~3-5% of our contribution profit estimate (1% higher than what we previously assumed for F23).”

Stanley has given ‘Equal-weight’ on Paytm shares for a target price of ₹695 apiece.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.