Paytm set to grow, says Axis Securities; upgrades to 'Buy', stock rises 3%

Shares of One 97 Communications, the parent company of Paytm, saw a surge in demand on the Indian stock exchanges on Wednesday, October 15, following an upgrade from brokerage firm Axis Securities. 

 

The analysts raised their rating on the fintech giant's stock to 'Buy' from 'Reduce', citing the non-linear growth potential from the MDR on UPI and the ramp-up in Buy Now Pay Later (BNPL) services as key drivers for future upgrades.

 

Following the upgrade, Paytm’s stock advanced 3.14 per cent to hit an intraday high of ₹1,283.90 per share on the NSE on Wednesday. At 1:02 PM, the stock was trading with gains of 2.82 per cent, at ₹1,280 per share, compared to the previous close of ₹1,244.80 per share on the NSE. A combined total of nearly 0.25 million equity shares worth nearly ₹317 crore have exchanged hands on the NSE and BSE so far. 

 

Axis Securities upgrades Paytm Stock to Buy

In their research note, Jayant Kharote, Mitesh Gohil, and Soubir Samadder, research analysts at Axis Securities, raised their FY27-28 Ebitda projections by 33-46 per cent. This upward revision comes on the back of expectations for stronger payment margins, a scalable financial services business, and the company’s focus on tight operational expenses. 

 

With this upgrade, the analysts set a target price of ₹1,500 for Paytm, implying a 41x EV/Ebitda multiple for FY28.

 

The analysts believe that large merchant payment providers, including Paytm, are entering a robust earnings growth phase. Key factors driving this optimism, they said, include a favorable pricing environment for both online and offline merchants, stabilising UPI-based transaction volumes, and a growing share of credit-linked products. 

 

Additionally, they highlighted that a more defined regulatory environment, including the introduction of regulations for payment aggregators, merchant KYC, and the DLG model, will boost ecosystem participation and growth.  ALSO READ | RBL Bank rallies 5%, hits over 5-year high on Emirates NBD stake buy report

Stable UPI share, growth in credit products

The analysts foresee the share of UPI-based digital merchant payments stabilizing at 75 per cent, leading to more predictable net payment margins across the industry. After years of rapid growth in UPI and intense competition for Gross Merchandise Value (GMV), the analysts believe India’s digital payments ecosystem is entering a phase of relative stability—both in terms of GMV mix and competitive dynamics.

 

“Paytm is well-positioned with its omnichannel presence across online, enterprise, and small merchants, coupled with strong long-term merchant relationships,” the analysts wrote. “The management's focus has shifted from stabilization to growth, as evidenced by fresh investments in new products and frontline staff.”

 

However, Axis Securities also cautioned that rising asset quality risks in Paytm's lending business could pose a significant challenge going forward. 

Paytm announces update on acquisitions

Paytm has announced that its Board, subject to the execution of definitive agreements and receipt of necessary approvals, has approved a series of transactions as part of the group’s restructuring. These include the acquisition of an additional stake in Paytm Financial Services Limited (PFSL), making it a wholly-owned subsidiary, the company said in an exchange filing.   Furthermore, Paytm plans to simplify its group structure by converting subsidiaries Admirable, Mobiquest, Urja, and Fincollect into direct wholly-owned subsidiaries (WOS) through intra-group transactions among existing WOS entities.

 

Additionally, Paytm will acquire the remaining stakes in several companies from Vijay Shekhar Sharma and/or VSS Holdings Private Limited (100 per cent owned by Mr Sharma) for a total consideration of up to ₹3.52 crores, based on the fair value (net asset value, NAV). This acquisition, the company said, will make each of these companies a WOS of Paytm. The company will also convert outstanding optionally convertible debentures and convertible inter-corporate deposits in Little Internet Private Limited (LIPL) into equity.