Paytm remains Bernstein's top pick as the brokerage sees merchant lending growth, operating leverage and potential monetisation of UPI through a Merchant Discount Rate as key drivers of earnings over the next few years.
Bernstein has retained its Outperform rating on One97 Communications, with a Rs 2,200 price target. Based on the stock's September 10 closing price of Rs 1,725.20, the target implies around 27% upside.
The brokerage expects Paytm's earnings per share to reach Rs 78 by FY29, around 70% above its estimate of Rs 54 based on consensus. Importantly, Bernstein said its FY29 EPS estimate would still be Rs 54 even without factoring in any potential benefit from MDR on UPI, underlining the role of the company's existing businesses in its forecast.
Merchant Lending Key Growth Driver
Bernstein expects Paytm's financial-services revenue to grow at around 27% CAGR between FY26 and FY30, driven primarily by merchant loan distribution. The brokerage estimates merchant loans will continue to account for around 75% of financial-services revenue.
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It sees a “clear right to win” for Paytm in merchant lending and a long runway for growth, supported by the company's merchant base and payments ecosystem. Merchant loan disbursals are expected to rise significantly through FY30.
The brokerage also expects meaningful operating leverage from Paytm's existing businesses. Its forecasts assume indirect expenses grow at only around 8%.
Another Earnings Lever
Introduction of an MDR on UPI could provide additional upside to Paytm's profitability. Bernstein said its investment case remains constructive even irrespective of the eventual MDR framework, given the expected growth in merchant lending and operating leverage.
The brokerage's view comes as Paytm enters FY27 with a stronger profitability base. The company reported FY26 revenue of Rs 8,437 crore and EBITDA of Rs 502 crore, marking its first full year of profitability. Financial-services revenue rose 52% to Rs 2,593 crore during the year.
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