Paytm among Jefferies' preferred fintechs as revenue growth outpaces costs
Mumbai Jul, y 22
Brokerage Jefferies has reiterated its bullish stance on Paytm, calling it one of its "preferred fintechs" after the company delivered stronger-than-expected June quarter earnings, driven by robust revenue growth and operating leverage that outpaced the rise in costs.
The brokerage maintained its 'Buy' rating on the stock and raised its price target to Rs 1,600 from Rs 1,450, citing sustained momentum across payments and financial services, improving profitability and scope for further upside if merchant discount rates (MDR) are introduced on high-ticket UPI transactions.
"For Jun-Qtr, Paytm's revenue growth of 28%, Ebitda margin of 8% were strong and ahead of expectations," Jefferies said, adding that "Paytm is among our preferred Fintechs."
The brokerage expects the company's revenue to grow at a 25% CAGR over FY26-29, supported by continued market share gains in payments, deeper monetisation and expansion of lending and financial services businesses.
Jefferies said Paytm's operational performance reflected healthy growth across key metrics. Gross merchandise value (GMV) rose 31% year-on-year, while wider payment margins and growth in financial services revenues helped drive 28% year-on-year revenue growth. Contribution margins remained stable at 55%, while operating leverage lifted EBITDA margins to 8% from 4% a year earlier, despite only a modest increase in fixed costs.
"Growth in contribution and operating synergies lifted Ebitda margin from 4% last year to 8%," the brokerage noted.
Looking ahead, Jefferies expects growth to be driven by payments market share gains, higher adoption of credit-backed payment products, expansion in merchant and personal lending, and scaling up of financial services such as broking, margin trading facility (MTF), insurance and gold investments.
It also expects AI -led efficiencies to improve profitability. "Operating synergies are not just coming from scale, but also leveraging internal AI platforms, and we expect these to lift Ebitda from Rs5bn in FY26 to Rs21bn by FY28," the report said.
Reflecting the stronger outlook, Jefferies raised its earnings estimates and said it expects EBITDA margins to expand from 6% in FY26 to 18% by FY29, while noting that any introduction of MDR on high-ticket UPI transactions could provide additional upside to its forecasts.
— ANI
Reader Comments
As a small business owner who uses Paytm daily, these numbers make sense. The ease of payments and lending options are genuine value-adds. But Jefferies' projections seem too optimistic - Indian market is too price-sensitive for such high margins. Let's see if they can actually hit that 18% EBITDA by 2029. 🤔
I remember when everyone wrote off Paytm after the RBI ban. Now they're back with strong numbers. Shows that Indian entrepreneurs are resilient. But I worry about over-reliance on lending - what happens if NPAs rise? Still, for stock investors, this is a good sign. 🙏
Interesting analysis from Jefferies. I've been following Indian fintech from the US, and Paytm's recovery is impressive. The AI-driven efficiency push could be a real differentiator. But let's be real - Indian regulatory environment is unpredictable. One policy change and these projections go out the window.
Good to see positive developments, but I'm not fully convinced. The MDR on UPI could backfire if not done carefully - small merchants like chaiwalas will suffer. Also, Paytm's lending growth needs scrutiny. Remember what happened with other fintech lenders? Regulatory clarity is still missing in many areas. 🧐
I use Paytm for everything - recharges, bill payments, even gold investments. Their interface is so intuitive. But Jefferies' 25% revenue CAGR projection seems ambitious considering competition from Google Pay, PhonePe, and even Amazon Pay. Still, if they execute well on financial services expansion, it's possible! ✨
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