Paytm founder says he will get stock grants when market cap crosses IPO level

Paytm founder Vijay Shekhar Sharma on Wednesday said his stock grants will be vested only when the company's market cap has crossed the IPO level on a sustained basis.

In a letter to shareholders, Sharma said the company's shares are down significantly from the IPO price amid volatile market conditions for high growth stocks globally.

Shares of Paytm parent One97 Communications jumped 5% to ₹646 in the intraday trade today following the announcement. The stock is down 70% from its issue price of ₹2,150.

Sharma said the digital payments firm is aiming to be operationally profitable by September next year.

"While we will publish our fiscal 2022 financial results in due course, we are encouraged by our business momentum, scale of monetisation and operating leverage. We expect this to continue, and I believe we should be operating EBITDA breakeven in next 6 quarters (i.e. EBITDA before ESOP cost, and by the quarter ending September 2023), well ahead of estimates by most analysts," Sharma wrote in the letter. "We are going to achieve this without compromising any of our growth plans."

This comes weeks after Macquarie Capital Securities cut the target price of One97 Communications to ₹450, 36% down from ₹700 it predicted in February.

The foreign brokerage had retained its "underperform" rating on the stock, saying its valuation for the digital payments major is based on the valuation of global fintech firms.

Suresh Ganapathy, who tracks the stock at Macquarie, has been bang on with his price targets for One97 Communications ever since the company made a dismal public market debut on November 18, 2021.

"We believe, to gain scale and size, fintechs need to go beyond distribution and lend, for which they need licences. With the RBI recently raising issues with Paytm Payments Bank and Chinese ownership being 25% or more, we believe the probability of Paytm getting a banking licence is significantly lower now, thereby impeding its ability to lend," the analyst had said.

On the day Paytm got listed, Ganapathy was blunt in his initiating coverage note titled, "Too many fingers in too many pies". The analyst stated that the dabbling in multiple business lines prevents Paytm from being a category leader in any business except wallets, which is becoming inconsequential given UPI's meteoric rise as a digital payments alternative.

Paytm said the number of loans disbursed through its platform grew 374% year-on-year to 6.5 million loans in Q4 FY22, while the value of loans disbursed was ₹3,553 crore (YoY growth of 417%).

The Reserve Bank of India (RBI) has barred Paytm Payments Bank from onboarding new customers citing "material supervisory concerns". The banking regulator had directed Paytm Payments Bank to appoint an IT audit firm to conduct a comprehensive system audit of its IT system.

Total merchant payment volume (GMV) processed through Paytm during the fourth quarter of FY22 aggregated to approximately ₹2.59 lakh crore ($34.5 billion), marking a year-on-year growth of 104%, the company said.