One 97 Communications Q1 Review: Paytm Parent Turns Profitable — Is This Sustainable? Brokerages Weigh In

Digital payments firm Paytm, operated by One97 Communications Ltd., reported its first-ever quarterly net profit since its listing in November 2021. The company posted a net profit of Rs 122.5 crore for the quarter ended June 2025, reversing a Rs 540 crore loss in the previous quarter. The profitability was driven by lower employee stock ownership plan costs, growth in its financial services distribution business, and higher other income.

Operationally, Paytm reported a positive Ebitda of Rs 71.5 crore, compared to a loss of Rs 88.6 crore in Q4FY25. The company attributed this to “AI-led operating leverage, disciplined cost structure and higher other income.” Gross merchandise value for the quarter stood at Rs 5.4 trillion, up 27% year-on-year.

Brokerages responded positively to the results, noting the company’s improved cost control and stable performance in its merchant lending and payments businesses.

BofA Securities maintained a "Neutral" rating on Paytm with a revised price objective of Rs 1,160, up from Rs 1,005, citing healthy business execution.

“Paytm turned reported Ebitda and PAT profitable in Q1,” BofA noted, adding that the company’s revenue was “in-line” with expectations while profitability exceeded forecasts. The brokerage highlighted that “overall opex was down 8% qoq led mainly by marketing which was down 30% qoq, employee cost which was also down 14% qoq.”

BofA also observed that Paytm’s contribution margin rose 10 percentage points year-on-year to 60%, driven by “higher net payment revenue and share of distribution of financial services revenue along with lower direct expense.”

On future guidance, BofA said, “Paytm would aim to achieve 15–20% Ebitda margin over next 2–3 years,” and noted that the company had taken price hikes on its devices from Rs 100 to Rs 129 without seeing customer churn.

Citi retained a “Buy” rating and raised its target price to Rs 1,215, citing reduced policy-driven downside risks and a leaner cost structure.

“Paytm delivered a significant beat on our Adjusted Ebitda estimates at Rs 100 crore in the quarter,” the brokerage said. It attributed the beat to “incremental cost efficiencies and higher than expected benefits from the relatively upfront nature non-DLG contribution profits.”

Citi highlighted strong performance in the merchant segment, noting “solid growth in devices footprint and merchant loan distribution revenues.” Device deployments rose by 0.6 million quarter-on-quarter to 13 million.

While the consumer business showed signs of recovery, Citi said it “remains relatively tepid.” The brokerage also adjusted its FY27 Ebitda multiple to 50 times from 35 times, citing improved visibility and reduced regulatory risks.

Bernstein rated Paytm “Outperform” with a price target of Rs 1,100, acknowledging the company’s profitability milestone but cautioning on its sustainability.

“Paytm achieved a positive PAT during the quarter without any big one-off line items,” Bernstein noted. However, it added that profitability was aided by “a sharp sequential decline in ESOP expense” and “a positive lead-lag impact from declining DLG disbursals.”

Bernstein expects contribution margins to normalise, stating, “Contribution margin to 60% which we think will decline back to mid-50s in the quarters ahead.”

The brokerage also highlighted a 6% rise in employee expenses (excluding ESOPs), driven by a 23% year-on-year increase in sales staff. It flagged the lack of recovery in personal loan disbursals, with merchant loans continuing to dominate.