Paytm Q2 Review: Strong Growth, New Businesses And AI Push Impress Analysts — Check Revised Target Price

One97 Communication Ltd.’s second-quarter results have received a largely positive response from global brokerages. The company showed healthy revenue growth and improving profitability, supported by strong performance in its core payments and financial services businesses.

Although profits were affected by a one-time write-off and slightly higher marketing costs, analysts believe Paytm’s long-term outlook remains strong with new business opportunities and better cost control ahead.

Most brokerages have revised their target prices upward, reflecting growing confidence in the company’s growth prospects and improving profitability. Jefferies has the most optimistic view, raising its target price to Rs 1,600 from Rs 1,420, citing strong revenue momentum and expanding financial services.

Citi also lifted its target to Rs 1,500 from Rs 1,215, highlighting continued gains in payments and new growth drivers such as credit on UPI and equity broking.

Bank of America increased its target to Rs 1,400 from Rs 1,290, pointing to effective cost control and AI-led monetisation opportunities, while UBS maintained a more conservative stance with a target price of Rs 1,250, noting gradual improvement but limited consumer-side growth.

According to Jefferies, Paytm’s revenue growth was solid, thanks to better profit margins in payments and strong expansion in financial services. These gains helped offset weakness in its marketing business.

Profits, however, were dragged down by a one-time write-off related to loans given to a gaming joint venture, following regulatory changes. The company’s contribution margin – a key measure of profitability – slipped slightly but is expected to stabilise by the fourth quarter.

Jefferies also noted that Paytm has been keeping indirect costs under control, though marketing and sales-related spending went up as the company prepared for the festive season.

The firm expects Paytm’s revenues to grow 24% annually over the next few years, with steady margin expansion. It continues to see Paytm as one of the most promising players in India’s financial sector.

BofA highlighted that even with a 22% jump in marketing costs, Paytm managed to double its Ebitda margin to 7% quarter-on-quarter, showing strong cost discipline.

Paytm also launched a new Postpaid product and made gains on the merchant side, helped by its growing use of artificial intelligence (AI). Management believes AI will help reduce credit losses for partners and make debt collection cheaper and more efficient.

BofA said Paytm’s UPI market share is likely to grow further, supported by greater use of credit options and EMIs during the festive season. It noted that consumer marketing costs have remained under control, which should help profitability going forward.

According to Citi Paytm’s market share gains in UPI-based credit products are helping improve its payment margins. The cost of payment devices has also come down, making that part of the business more profitable.

Citi added that Paytm is seeing growing traction in its equity broking segment. Citi expects steady growth and margin expansion, driven by payment aggregation, UPI credit products and broking services.

UBS said Paytm showed small operational improvements, mainly due to better performance in financial services and cost control. The merchant business remains strong, while the consumer side saw limited growth.