Shares of One 97 Communications Ltd., the parent of payments platform Paytm have opened with gains of over 2 percent after brokerage firm Bernstein initiated coverage on the stock.

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Bernstein has assigned an outperform rating on Paytm on the stock with a price target of Rs 1,100, which is a potential upside of 22 percent from current levels. The stock has gained nearly 10 percent in the last three trading sessions.

The 2 percent surge on Thursday has taken Paytm's shares to the highest level in 18 months. The last instance of the stock trading above Rs 920 was on February 10, 2022.

Bernstein in its note said that Paytm's early signs of having an edge in digital lending puts it on the right side of the disruption in the sector. Paytm has managed to achieve this by leveraging its dominant digital payments platforms.

The brokerage further expects the company's loan disbursal volumes to grow sharply and achieve a market share of nearly 4 percent by financial year 2026 in the high-yield (Over 13 percent), household lending segment.

Paytm had disbursed loans worth Rs 14,845 crore through the platform during the June quarter. A total of 1.28 crore loans were disbursed through the platform, a growth of 51 percent from last year.

Further, as the margins in the payments business are stabilising, Bernstein expects the business to breakeven by financial year 2025 and generate an Earnings per Share of Rs 130 by financial year 2030.

Bernstein's price target of Rs 1,100 is the third highest on the street for the stock. Ahead of Bernstein, Citi and Goldman Sachs have a price target of Rs 1,200 each, while Dolat Capital has a target of Rs 1,260.

Shares of Paytm are trading 2 percent higher at Rs 922. The stock may have more than doubled from its all-time low of Rs 438 earlier this year, but it still remains nearly 55 percent below its IPO price of Rs 2,150.

First Published:Aug 24, 2023 9:43 AM IST