Bernstein has expressed a negative view on Paytm's acquisition of a 25% stake in a Brazil-based embedded finance startup for $1 million.
A note by Bernstein called the development unfavourable, given that Paytm has yet to achieve profitability in the home market. Expanding into newer markets raises concerns about the company's strategic focus, which has been a key attraction, said Bernstein. Additionally, the embedded finance sector is becoming increasingly competitive, further questioning the rationale behind this move.
Bernstein, however, has maintained its Outperform call on the stock with a target of Rs 1,100 per share for the company.
Paytm’s wholly-owned subsidiary, Paytm Cloud Technologies had on February 2 said that the company is investing $1 million (Rs 8.7 crore) to acquire a 25 percent stake in Seven Technology LLC, the parent company of Brazilian embedded finance startup Dinie.
Dinie becomes an associate entity of Paytm after the acquisition. Paytm had said that the acquisition aligns with its ambition to expand merchant payments and financial services business model internationally, particularly in emerging markets with strong fintech potential.
Paytm, through its subsidiary Paytm Cloud Tech, had on January 20 announced that it will be setting up businesses in UAE, Saudi Arabia and Singapore to leverage its tech-enabled merchant payments and financial services in 'similar' international markets, and seek local licenses and partnerships.
Paytm founder and CEO Vijay Shekhar Sharma is confident of being PAT profitable in 'some quarters', and said the year 2025 will hopefully be about the turnaround of the company.
Throughout 2024, Paytm evaluated its international operations, particularly subsidiaries linked to its legacy business of providing services to telecom operators in regions such as the Middle East, Southeast Asia, South Asia, and Africa. The company decided to streamline these subsidiaries to focus more on its core financial services.
In January 2024, One97 Communications had announced a Rs 100 crore investment in the Gujarat International Finance Tec-City (GIFT City). This move aims to set up a global financial ecosystem, focusing on AI-driven remittances and payment technologies.
The fintech player has been waiting for RBI's approval for its payment aggregator license. The regulator had in November 2022 rejected Paytm’s application due to non-compliance with foreign direct investment norms.
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