Shares of One 97 Communications Ltd (Paytm) declined 5 per cent in Thursday's trade as a couple of brokerage suggested 'Neutral' or 'Hold' ratings on the stock, saying they remain watchful on the challenging macro-environment, traction in the financial distribution business and near-term UPI market share. Jefferies has 'Hold' rating on the stock and a target price Rs 850. It noted that the government incentive of Rs 1,500 crore for low-value UPI P2M transactions are half of last year's and are, thus, negative for the company. The foreign brokerage expects incentives falling from 20 basis points to 6 basis points, saying if the company's incentives fall proportionately, its FY25 adjusted Ebitda could be 50 per cent below estimates.
MOFSL suggested a target price of Rs 870 on the stock. The stock fell 5.47 per cent to hit a low of Rs 721 on BSE.
This brokerage said Paytm’s strategic focus on financial services business and cost optimization should boost profitability, with the financial business contributing 27 per cent of revenue by FY28.
"Leveraging its merchant network, Paytm remains focused on scaling up its loan distribution, supported by strong lender partnerships. Cost reductions and an estimated revenue CAGR of 26 per cent from FY25-27E will enable Paytm to achieve Ebitda breakeven in FY27E. We expect the company to gain traction in new customer on-boarding and grow its MTU base, which will enable healthy cross-selling, while growth in the merchant business will remain the key profitability driver in the near term," MOFSL said.
MOFSL said the potential introduction of MDR on UPI will be a significant boost Paytm’s revenue and will incentivize the company to push for market share gains in the consumer payments. The recent SEBI approval for Paytm Money to venture into investment insights and research services presents an opportunity to diversify into wealth management, potentially unlocking a new stream of fee-based income, it said.
"We remain watchful on the challenging macro-environment, traction in the financial distribution business and near-term UPI market share. Maintain Neutral rating with a revised TP of INR870 (based on 17.7 times September 2026 Ebitda)," the brokerage added.