Rs 2,037 Crore Worth Shares Sold: AntFin Sells 3.6% Stake In Paytm; Stock Seen To Rise 22% Ahead

One97 Communications aka Paytm witnessed a huge block deal with Chinese billionaire Jack Ma-owned AntFin (Netherlands) Holdings BV selling a portion of its stake into the fintech giant for a whopping Rs 2037.01 crore. AntFin's stake sale also comes after the company's top boss Vijay Shekhar Sharma agreed to buy its 10.30% stake in Paytm. In the latest block deal, Societe Generale and Morgan Stanley Asia Singapore Pte were among the top buyers on August 25. The year 2023 so far has been bullish for Paytm, and a further potential upside of 22% is expected.

On BSE, Paytm's share price ended at Rs 899.30 apiece, down by 0.54% on Friday. The block deal was carried out in the open market.

However, in the trading week that ended on August 25, the stock gained over 5.4%. Year-to-date, the stock rallied by over 69%.

Data from BSE showed that Antfin sold over 2.27 crore equity shares in Paytm at Rs 895.20 per share --- aggregating to Rs 2,037.01 crore. This would be a stake sale of 3.6% by Antfin in Paytm.

Further, in the block deal, Germany-based Societe Generale purchased 59.87 lakh equity shares at Rs 895.20 per share amounting to Rs 536 crore. Also, Morgan Stanley Asia Singapore bought over 39.96 lakh shares at Rs 895.20 apiece, totalling Rs 357.73 crore. Other investors who bought stakes in Paytm on August 25 are --- Citigroup Global Markets Mauritius, BNP Paribas Arbitrage, Goldman Sachs (Singapore), Bay Pond Partners, The Royal Bank of Scotland Plc, Motilal Oswal and Nippon India MFs, Jupiter South Asia Investment Company, and ICICI Prudential Life Insurance Company among others.

As of June 30, 2023, Antfin's shareholding stood at 15,08,87,740 equity shares or 23.79% in the company.

In the early days of August, Paytm's MD and CEO Vijay Shekhar Sharma executed an agreement to buy a 10.30% stake in Paytm from Antfin through an off-market transfer. Post the deal, Sharma's shareholding in Paytm (direct and indirect) will increase to 19.42%, whereas Antfin's shareholding will reduce to 13.5%.

Earlier, this week, research firm Bernstein initiated coverage on One97 Communications Limited (OCL) which owns the brand Paytm, the pioneer of QR code, Soundbox and mobile payments. It has pegged a target price of ₹1,100 apiece, a potential rally of over 22% from current levels. Berstein finds the fintech pioneer, Paytm, a dominant digital payments platform with a promising head start in the lending business, to be on the right side of the disruption. "We initiate on Paytm with an Outperform rating and a target price of ₹1,100," it noted.

As per Bernstein, Paytm has leveraged its large Monthly Transacting User (MTU) base, thanks to its dominant position in payments, to gain a head start in the digital lending segment. Also, It expects the company to continue its strong growth in the lending business. Simultaneously, a rise in payment volume will ensure that the business turns profitable in FY25E and achieves an EPS of nearly ₹130 by FY30E.

Further, Bernstein took note of that the rise of UPI in cashless payments, which now account for more than 60% of total cashless transactions including a lion's share of high-value transactions has led to the emergence of new winners.

Its note said, "We find Paytm developing into a sustainable, profitable model with an edge in small ticket consumer lending, helped by steady improvement in payments margins," it added. It also expects a healthy 22% growth in revenues for the business till FY30E, driven by an increasing share of revenue from lending/financial services and forecasts the business to break even in FY25E. It sees the valuation more than justified based on the assumption that the loan disbursal can continue to grow at 50% CAGR till FY30E."

Paytm has gained consistently across other payment solutions such as card machine payments, with a high single-digit market share in credit card spends (card machine) through a 7-8% share in card machines installed base. Through its various payment offerings, 25% of the country's cashless payments flow through Paytm, it added.