Next multibagger from digital professions: Director of Elixir Equities

Indian digital businesses are growing rapidly, aided by stronger adoption of online services across various segments, especially in the fintech landscape. Given this development, Dipan Mehta, director of Elixir Equities, recently said in an interview with a publication that he believes the next round of multibagger stocks will come from digital companies.

Elaborating on the subject, Mehra said that the next set of multibaggers will come from concept stocks rather than mature companies. He defined conceptual stocks as where companies do something different with a huge market and can be scaled up at very low cost.

He added that many digital companies meet these criteria, which is why he is bullish on stocks of companies like Paytm, India’s leading digital payments and financial services company, and pioneer in mobile and QR payments.

For Paytm, Mehta said the stock was on his watchlist and he was following it “very closely”.

He went on to say that he may invest in the business in the future, depending on his goal of profitability and his source of income.

Paytm shares have been gaining over the past few months and closed sharply higher on Friday at Rs 727 after a 2.83% jump.

“My simple observation is that any of these companies or most of these companies can turn out to be great value creators because of the way the business models are and our understanding of those business models,” a- he said in the interview.

In April, Paytm MD and CEO Vijay Shekhar Sharma shared a letter with shareholders stating that the company would break even in operating EBITDA by September 2023, supported by stronger business momentum, scale monetization and operating leverage.

He also pointed out that the company plans to achieve this without jeopardizing any of its growth plans.

Paytm has revolutionized digital payments in the country and paved the way for greater financial inclusion. Several analysts are optimistic about Paytm’s business model and its path to profitability. Major brokerages continue to maintain their buy ratings for the stock, based on the scale the company sees in its unique high-margin businesses and subsequent revenue growth each quarter.

Paytm started this fiscal year on a high note, with revenue growth of 89% YoY in the first quarter of FY23 to Rs 1,680 crore, while EBITDA loss (before ESOP) narrowed to Rs 275 crore, marking an improvement of Rs 93 crore QoQ. The company’s contribution profit increased by 197% year-on-year to Rs 726 crore, resulting in an increase in contribution margin to 43% of revenue from 35% in Q4FY22.

In its latest August monthly update, the company said its loan distribution business had now reached an annualized disbursement rate of Rs 29,000 crore, as it disbursed loans worth Rs 4,517 crore in the first two months of Q2FY23.

The company also strengthened its leadership in offline payments by deploying more than 4.5 million subscription payment devices to merchants across the country.

Its strong performance reflects its position in India’s digital business landscape, as it remains focused on creating long-term shareholder value in addition to empowering millions of consumers and merchants in the country.



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