Brokerage firms express optimism over Paytm's growth post Q 1 FY25 earnings

New Delhi [India], July 22 : Brokerage firms Goldman Sachs, Jefferies, Bernstein, and Dolat Capital have collectively voiced optimism about the growth and recovery trajectory of Paytm, a leading payments and financial services distribution company and pioneer of QR and mobile payments, following its first-quarter fiscal year 2025 earnings report on Friday.
Dolat Capital echoes this sentiment, citing Paytm's strategy for business expansion and enhanced cost efficiency post-Q1 setbacks, positioning the company for a robust recovery in the financial services sector.
Bernstein observed that Paytm's daily GMV (Gross Merchandise Value) for continued business remained flat QoQ, with the merchant GMV trends almost back to pre-disruption (Jan'24) levels while the consumer GMV continued to witness a consistent improvement.
The global brokerage firm Goldman Sachs also expressed optimism about Paytm's growth prospects citing promising signs in several key areas. "We are encouraged by the early indications of stabilization in Paytm's Monthly Transacting Users (MTUs), ramp-up in merchant lending and strong cost-control outlook," said a brokerage report by Goldman Sachs. It has also raised the target price on Paytm's share price to Rs 420 from Rs 400 earlier.
Meanwhile, looking ahead to FY26, Jefferies expects positive cash flows driven by top-line recovery and continued cost control, albeit at a gradual pace. They anticipate a gradual decline in cash burn over the next quarters following the full impact of RBI actions.
"While we expect top-line recovery and cost control to drive +ve cashflows in FY26E, the pace will be gradual. Mgmt expects 15-20 per cent EBITDA mgs by FY27-28E" said Jefferies.
Global research firm BOFA securities noted that while Insurance and wealth contribute approximately 3-4 per cent to Paytm's revenue, these segments have potential to bolster the topline in the future. Given Paytm's early state of evolution, BOFA anticipates the company achieving EBITDA breakeven in FY28.
Brokerage Morgan Stanley took a cautious approach and said pending regulatory approvals could affect the smooth implementation of the company's new strategy in the near term.
Paytm reported a platform GMV for continued business of Rs 4.3 lakh crore, and the total merchant subscriber base stood at 1.09 crore by June end. Its total monthly transacting user base stabilised at 7.8 crore during the quarter.
The report highlights Q1 FY25 as the likely bottom for key financial metrics, while operational metrics show an upward trend with stabilising average Monthly Transacting Users (MTU). Despite the full financial impact of recent disruptions evident in Q1 FY2025, there's a positive outlook, especially with expectations of increasing subscription revenues per device in the upcoming quarters.
On this growth trend and profitability, Dolat Capital said, "We believe that the company has huge potential for growing multi-fold revenues over next decade and turn highly profitable starting FY26E."
In Q1, Paytm reported operating revenue of Rs 1,502 crore. Revenue from financial services reached Rs 280 crore, and marketing services contributed Rs 321 crore. The company achieved a contribution profit of Rs 755 crore with a 50 per cent margin.