Paytm Q3 Result Review: Path To Profitability Remains Uncertain, Say Analysts

One97 Communication Ltd.'s third quarter performance has prompted mixed reactions from analysts, with several brokerages maintaining cautious stances on the company’s outlook, even as loss narrowed. While some see potential upside in distribution revenues, others remain wary of the risks associated with its lending model and overall financial recovery.

Despite some positive developments, such as a strong GMV increase and improved operating leverage, concerns around slower uptake in lending revenues and the company's path to profitability persist.

Here is what brokerages said about Paytm's Q3 results.

BofA has maintained its 'underperform' rating on Paytm, setting a target price of Rs 535 per share. While Paytm’s revenue was largely in-line with expectations, it benefited from cost-control measures and an Ebitda beat, it said.

However, BofA cautioned that achieving net income breakeven remains distant, with risks of slower uptake in lending revenues continuing to pose challenges. The firm also highlighted that Paytm is looking to expand its distribution model, which could impact its future growth trajectory.

Macquarie has also maintained an 'underperform' rating, with a target price of Rs 730 per share. Macquarie acknowledged a strong performance across all metrics, including a larger-than-expected reduction in losses, driven by higher revenues and lower ESOP costs.

The brokerage noted a strong GMV increase and improving operating leverage. While the outlook is somewhat positive, Macquarie pointed out upside risks to distribution revenues, given higher take rates.

On the other hand, Jefferies has kept a 'hold' rating with a target price of Rs 850 per share. It sees Paytm nearing break-even in the third quarter. Lending will be the key driver for the company's recovery, according to the brokerage.

While adjusted Ebitda break-even is expected by the fourth quarter, Jefferies cautioned that the new lending model may temporarily impact near-term margins.

Additionally, other segments continue to show muted trends, and Jefferies suggested that improving monthly transacting user additions could be key to stimulating growth.

CLSA has also maintained a 'hold' rating, however it raised the target price to Rs 820 from the earlier Rs 725 per share. The brokerage has increased its financial year 2027 Ebitda estimates by 4%, due to lower operating expenses. It also pointed that the stock is currently trading at 19 times financial year 2028 EV/Ebitda.

Paytm continues to focus on cost reduction, which has been more successful than anticipated, resulting in an improved Ebitda outcome the brokerage said in its note. Lending has become a significant driver of Ebitda profitability, with the calculated net take rate rising by 2 percentage points to 9%, driven by a higher share of loans with a default loss guarantee arrangement.

However, CLSA remains cautious about Paytm's heavy reliance on lending, particularly in the current macro environment.