Shares of One 97 Communications, the parent of Paytm, have corrected nearly 20% from their 52-week high of Rs 1,381 on the National Stock Exchange of India, weighed down by broader market volatility and global geopolitical tensions. Despite this pullback, Haitong, a Hong Kong-based brokerage, has initiated coverage on Paytm with an ‘Outperform' rating and a target price of Rs 1,410, implying an upside of about 26% from current levels.
The stock is also down 14.8% year-to-date, amid risk-off sentiment linked to the ongoing Iran–Israel–US conflict. Notably, the stock remains 31.64% higher on a one-year basis and has rebounded 10.99% so far in April, signalling renewed investor interest.
Haitong's bullish stance rests on Paytm's positioning as a leading beneficiary of India's expanding digital payments landscape. The company has evolved from a consumer-focused wallet platform into a merchant-centric ecosystem, with over 48 million merchants onboarded. Its leadership in UPI peer-to-merchant (P2M) payments and growing financial services distribution franchise underpin a robust growth outlook.
The brokerage expects Paytm's revenue to grow at a compound annual growth rate (CAGR) of around 25% over FY26–FY28, driven by rising merchant monetisation, increased adoption of subscription services and expansion in lending products. Importantly, payment revenues are projected to grow faster than gross merchandise value (GMV), supporting margin expansion.
Key Drivers Behind Haitong's Optimism
Leading fintech with improving monetisation: Paytm is among the top players in India's UPI ecosystem, with a growing share in transaction value. Its monetisation has steadily improved, reflected in rising revenue per monthly transacting user. This has been enabled by a strong distribution network, diversified product offerings and strong brand recall. Payments continue to contribute nearly 60% of total revenue and are expected to remain the dominant segment.
Strong moat in merchant lending distribution: A key differentiator for Paytm is its merchant lending business. The company's access to granular merchant transaction data and its on-ground sales force provide a competitive edge in originating loans for partners. Financial services distribution revenue has rebounded sharply, growing 59% year-on-year in the first nine months of FY26. With only about 7% of subscription merchants currently availing loans, there is significant headroom for growth as the company targets 20% penetration.
ALSO READ: Paytm Vs Pine Labs: Jefferies' Lower Target Price Still Indicates Strong Upside
Structural levers for margin expansion: Haitong expects net payment revenues to grow at a faster pace than GMV, leading to improvement in payment margins to over 10 basis points by FY28. Key drivers include a higher mix of merchant discount rate (MDR)-linked instruments, growth in EMI transactions, scaling up of Paytm Postpaid and potential regulatory approval for onboarding online merchants as a payment aggregator.
Operating leverage driving profitability: Paytm has already turned core Ebitda positive and is benefiting from strong operating leverage. Cost optimisation efforts, including a reduction in employee expenses and improved processing margins, have supported profitability. The brokerage expects core Ebitda and profit to grow nearly fourfold between FY26 and FY28, with margins expanding to around 17%.
Outperforming peers on key metrics: Compared with peers such as PB Fintech, PhonePe and Pine Labs, Paytm stands out on several operating parameters. The company has demonstrated superior cost efficiency, with employee expenses as a percentage of revenue declining sharply in recent years. It has also achieved positive core Ebitda, unlike some peers that continue to report losses due to high ESOP costs.
Additionally, Paytm's technology investments and relatively lower marketing spend indicate a more balanced approach to scaling its business while maintaining profitability.
Valuation and outlook: Haitong values Paytm using a discounted cash flow (DCF) methodology, implying a price-to-earnings multiple of 41x and an EV/Ebitda multiple of 34x on FY28 estimates. The brokerage expects return on equity (RoE) to improve to around 12% by FY28, supported by earnings growth and operating efficiencies.
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.