Rallied By 95% From 1-Year Low: Paytm Shares Rise 3% After Vijay Shekhar Sharma Announces Big AI Plans

Fintech giant, One 97 Communications aka Paytm's share price rose by 3% on Tuesday after the company's annual report for FY23. One of the biggest factors that drove Paytm shares would be its plan to invest in Artificial Intelligence. Also, the company is expanding its business including the development of a small revolution for financial inclusion, and digital lending among others. In the next 3 years, Paytm's Founder and CEO Vijay Shekhar Sharma expects to see some worthy numbers and results of hard work put in by the team.

On BSE, Paytm shares ended at Rs 857.15 apiece, soared by 2.3%. The company's market cap is at Rs 54,370.86 crore at the current price level. The stock has rallied by over 2.8% with an intraday high of Rs 861.65 apiece.

Paytm shares are up by nearly 95% from its 52-week low of Rs 439.60 apiece on BSE.

The stock is currently closing the gap towards the 52-week high of Rs 915 apiece.

In the annual report FY23, Sharma told shareholders "We have created a successful template in the last 2 years of distributing small digital loans using payment relationships with consumers and merchants. Our lending partners own the risk and leverage our ability to help them distribute and collect loans. In products where it is viable for them, they can of course collect the loans themselves."

Further, he said, by helping enable digital loan collection on the app, Paytm is now creating a small revolution for financial inclusion, where a loan of as small as a few hundred rupees can be disbursed and collected at a very minuscule cost.

In India's Digital revolution after mobile payments, he added, Paytm's next contribution will be - small mobile credit with high credit quality and fully compliant with the regulator's guidelines.

Expectedly this requires sophisticated capabilities in AI and other technologies, Sharma added.

He said, "I am very proud of our Advanced AI capabilities in use and how we are expanding. We are building an India-scale AI system which will help various financial institutes in capturing possible risks and frauds, while also protecting them from new kinds of risks due to advancement in AI."

Hence, Sharma revealed that Paytm is investing in AI with an eye on building an Artificial General Intelligence software stack.

"We believe by building it in India we are not only making our country's tech capability, but also creating something that could be leveraged outside India," the top boss added.

With a disciplined and result-oriented approach in all its selected investment areas, Paytm is sure to capitalize and build strong differentiators in the market and in turn a business that scales efficiently without linearly adding to costs.

Also, having PayPay Japan as a partner and customer adds to Paytm's advantage as the system costs are shared between the two countries, Sharma pointed out.

Sharma also shed some light on the new entrant digital platform ONDC. He said, "Beyond payment and credit disbursement business, I am very excited by possibilities of ONDC - Open Network of Digital Commerce, an initiative of Government India. We have seen very encouraging early results of the same."

Lastly, Sharma concluded, "In my opinion, in the next 3 years you will see some worthy numbers and results of hard work put in by the team. Your company's team remains committed to serve India and build a long-term profitable business."

Recently, Vijay Shekhar Sharma agreed with China's Ant Financial to buy its 10.30% stake in the company. Despite the latest bearish tone, brokerages like BofA and Dolat Capital are optimistic about Paytm shares, especially after the founder's stake purchase deal.

After the Sharma and Antfin deal, BofA's research note added, "We believe a Chinese shareholder (Antfin) ceasing to be the largest shareholder, would also directionally be positive for the company fundamentals. We note that on Nov-22, the Reserve Bank of India (RBI) declined Paytm Payments Services Limited's (PPSL) application to operate as a payment aggregator and it gave it 120 days to reapply for the license. Until it gets approval, the company, which is a wholly owned subsidiary of Paytm, has been asked to not onboard new online merchants. As per the media, this was to give PPSL time to comply with foreign direct investment (FDI) guidelines. We now don't expect such concerns going ahead. Maintain Buy on Paytm on favourable risk-reward."

Hence, BofA's price target for Paytm is Rs 1,020 ahead.

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