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

Paytm’s stock price saw an uptick of 3% on Tuesday after the fintech giant One 97 Communications, which operates the brand Paytm, released its annual report for FY23. One of the major highlights that drove investor sentiment was the company’s plan to invest heavily in artificial intelligence capabilities.

Paytm founder and CEO Vijay Shekhar Sharma also elaborated on the company’s plans to expand operations in digital lending and financial services for the underserved, expressing confidence that the next 3 years will reveal the results of hard work by the team.

On the Bombay Stock Exchange, Paytm shares ended trading at ₹ 857.15 per share, marking a gain of 2.3%. The company’s market capitalization currently stands at ₹ 54,370.86 crore. Intraday, the stock hit a peak of ₹ 861.65 apiece, rallying by over 2.8%.

Here is a table showing Paytm’s historic stock price changes over the past year until today (August 23, 2023):

Table 2: The table shows daily prices and percentage change over the past year until the current date

He further added that by facilitating digital loan collections through its app, Paytm is enabling financial inclusion in a major way, where loans as small as a few hundred rupees can be disbursed and collected in a cost-effective manner.

According to Sharma, after leading India’s digital payments revolution, Paytm’s next big contribution will be driving access to small credit lines in a fully compliant manner. This requires robust artificial intelligence and technology capabilities.

Paytm’s Visionary AI Investment and Business Expansion

Sharma mentioned “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,”.

In line with this, Paytm is strategically investing in artificial intelligence with the vision of developing a domestically built Artificial General Intelligence software stack.

Sharma believes that building such capabilities locally will not only boost India’s prowess in technology but also create solutions that can be deployed globally.

The partnership with PayPay Japan allows Paytm to share system costs across the two countries, giving it an added advantage.

Empowering Financial Inclusion: Paytm’s Transformative Role in Digital Lending

On the lending front, Sharma is confident that Paytm’s disciplined approach across chosen investment areas will help build differentiated offerings and a business that can scale efficiently without exponential increases in costs.

Equity analysts also remain bullish on the stock. Bank of America has a price target of ₹1020 on Paytm shares.

The company’s focus on ramping up lending operations comes at a time when credit demand is on the rise in India, as the economy continues to recover from pandemic lows.

Paytm is betting big on leveraging technology to disburse small ticket loans to the huge underserved population while keeping risks under control. This also aligns with the Central Government’s push for financial inclusion.

As per data from credit bureaus, the number of loan accounts of consumer durable lenders grew 45% year-on-year in the June quarter. Two-wheeler loans and personal loans also saw double-digit credit growth.

Paytm, with its wide reach, customer base, and merchant partnerships, is well-positioned to capitalize on the credit demand. Its investments in AI and compliance will be pivotal in the sustainable growth of its lending vertical.

A Global Vision: Paytm’s Strategic Outlook and Collaborative Synergy

Sharma aims to build a full-stack AI system including computer vision, natural language processing, and more. With frauds and defaults being key concerns, the robust AI system will enable partner financial institutions to effectively manage risks.

At the same time, Paytm intends to open up AI-driven insights to its partners rather than compete with them directly in the lending business.

Having pioneered digital payments in India, Paytm has amassed huge amounts of customer data over the years. This gives it an edge in leveraging AI for credit scoring and risk assessment.

Paytm can combine a customer’s payment history, spending patterns, merchant transactions, and wealth management activity to build a financial profile. Advanced algorithms can churn this data to generate creditworthiness scores and tailor loan offerings.

While this holds immense potential, concerns around data privacy and security cannot be overlooked. Paytm will need to win customer trust by being transparent on data collection and usage.

With India still, in the early stages of digital lending, this segment is forecast to grow manifold over the next decade. As per estimates, India’s digital lending market will expand at a CAGR of 22% to reach $350 billion by 2023.

Paytm with its ambitious roadmap for lending and technology, could emerge as a frontrunner. However, the path may not be devoid of challenges.

A Glance at the Future: Paytm’s Projected Trajectory

For Paytm, it will all boil down to flawless execution and scaling up in a risk-intelligent manner. Its good start in the segment and growth vision has certainly impressed investors.

With the stock still trading 50% below the issue price after the lackluster IPO debut, investors will now be keenly tracking the company’s progress in lending and technology.

Sustained growth in operations, profitability, and lending volumes will ultimately decide if Paytm’s AI-driven credit foray pays off and brings its stock price back into favor on Dalal Street.

Key Takeaways

1. Paytm share price rose 3% on Tuesday after the company’s annual report for FY23 highlighted plans for AI investment.
2. Paytm founder Vijay Shekhar Sharma expressed confidence in the company’s progress over the next 3 years.
3. Sharma outlined plans to expand digital lending operations for the financial inclusion of the underserved.
4. Paytm is building an AI system to help financial institutions manage risks and detect fraud.
5. The company aims to develop a locally built Artificial General Intelligence software stack.
6. Paytm shares have rallied 95% from their 52-week lows. The stock rapidly headed to its 52-week high.
7. Equity analysts like Bank of America have a bullish target price of Rs 1020 on the stock.
8. Paytm is well-positioned to leverage India’s credit boom due to its partnerships and customer base.
9. Investments in AI and compliance will be key for the company’s lending vertical.
10. Sustained growth in operations and profitability will determine if Paytm’s credit foray pays off.

Fintech disruptors will need to collaborate meaningfully with traditional banks and NBFCs to drive financial inclusion. Building trust amongst the unbanked population through consumer education will be crucial.

Regulatory compliance and preventing over-lending also need close monitoring as bad loans could seriously dent the credit ecosystem.