Paytm shares rise 2% after Q2 results. What are Jefferies, Goldman Sachs, and others saying?

Shares of fintech major Paytm rose 2% to Rs 1,686 on the BSE on Tuesday after it reported a 976% year-on-year (YoY) growth in its consolidated net profit at Rs 226 crore. The same stood at Rs 21 crore in the year-ago quarter. Revenue from operations climbed 28% YoY to Rs 2,648 crore.

However, on a sequential basis, profit rose just 3% from Rs 220 crore posted in the preceding June quarter. The sharp increase in reported profit was also helped by a lower exceptional charge. Paytm recorded exceptional expenses of Rs 4 crore during the September quarter, compared with Rs 190 crore a year earlier. Profit before exceptional items increased 9% to Rs 229 crore.

Buy, sell or hold Paytm shares?

Jefferies has maintained its Buy rating on Paytm with a target price of Rs 2,150, implying a 33% upside. In its first assessment of the September quarter results, the brokerage said the company continued to deliver strong growth, supported by higher financial services revenue and improved operating efficiency.


The introduction of UPI merchant discount rate (MDR) charges after Diwali is expected to provide an additional revenue stream. Management estimates that MDR could generate revenue equivalent to 2.5 basis points of gross merchandise value (GMV), supporting further investments in expansion. The company increased its sales staff by 19% quarter-on-quarter.

Jefferies expects Paytm's strong growth momentum to continue and believes the company will remain in the 25% compound annual growth rate (CAGR) category.

Goldman Sachs has maintained its Buy rating while lowering its target price to Rs 2,010 from Rs 2,070. The brokerage highlighted several positives in the company's September-quarter results, including strong revenue growth, expanding EBITDA margins and improving momentum in financial services.

Paytm has also quantified its expected benefit from UPI MDR at an additional 2.5 basis points in payment processing margin. Goldman Sachs estimates this could translate into Rs 8-9 billion in EBITDA in FY28, broadly in line with its existing projections. The disclosure is expected to give the market greater clarity on the company's incremental EBITDA opportunity.

The key negative was higher-than-expected capital expenditure related to devices. This is expected to increase depreciation and amortisation costs, prompting Goldman Sachs to trim its earnings per share estimates and lower its target price.

Citi has maintained its Buy rating and raised its target price to Rs 1,940 from Rs 1,560 following the company's September-quarter results.

Paytm's second-quarter EBITDA and EBIT came in 4% and 1% above Citi's estimates, respectively, at Rs 2.7 billion and Rs 1.2 billion. Net payment margin increased by 0.5 basis points quarter-on-quarter to 9 basis points, exceeding Citi's expected improvement of 0.3 basis points.

Revenue growth in financial services accelerated to 49% year-on-year in the September quarter, compared with 45% in the June quarter and Citi's estimate of 44%.

Citi noted that Paytm is seeing faster growth in financial services and an improvement in net payment margins even excluding the impact of UPI MDR. The company is also increasing investments in technology, including artificial intelligence, marketing and distribution, with a focus on acquiring monthly transacting users (MTUs) and expanding its on-ground sales force.

Disclaimer: This article has been written by Veer Sharma, who is not a SEBI-registered Research Analyst or an Investment Adviser. Veer Sharma and his/her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here.