Not over yet! After 70% gains this year, Bernstein sees further upside in Paytm. Here’s why

Bernstein has called Paytm a dominant digital payments platform while initiating coverage on the company with an outperform rating and target price of ₹1,100.

The research firm is betting on the company’s dominance in the digital payments segment.

The pegged target price of Rs 1,100 apiece is actually a potential rally of over 21.5% from the current levels. Berstein finds the fintech pioneer, with a promising head start in the lending business, to be on the right side of the disruption.


Shares of Paytm have significantly outperformed the market with 70% gain on a year-to-date basis. The stock more than doubled from its 52-week low.

Paytm has leveraged its large monthly transacting user (MTU) base — thanks to its dominant position in payments — to gain a head start in the digital lending segment, said the research firm.
It expects the company to continue its strong growth in the lending business.

The lending business continued to make giant strides with Rs 14,845 crore loans distributed through the platform in the first quarter, up 167% year-on-year.

Simultaneously, a rise in payments volume is expected to ensure that the business turns profitable in FY25E and achieves an EPS of nearly Rs 130 by FY30E.

Bernstein, in its research report, noted that the rise of UPI in cashless payments, which now account for more than 60% of total cashless transactions including a lion's share of high value transactions, has led to emergence of new winners.

"We find Paytm developing into a sustainable, profitable model with an edge in small ticket consumer lending, helped by steady improvement in payments margins," it added.

It also expects healthy 22% growth in revenues for the business till FY30E, driven by an increasing share of revenue from lending/financial services and forecast the business to break even in FY25E.

Paytm's consolidated net loss narrowed to Rs 357 crore for the quarter ended June 2023. At the operating level, EBITDA before ESOP improved to Rs 84 crore, with margins at 4%, driven by increase in contribution margin and operating leverage.

Bernstein sees the valuation more than justified based on the assumption that the loan disbursal can continue to grow at 50% CAGR till FY30E.

On Thursday, Paytm shares were trading 0.40% higher at Rs 908.40 on NSE.